Welcome to Worth Your While, Business Valuation Consultants, LLC’s blog on business valuation and its related topics. In our line of work, we get questions on the unique scenarios business owners face. The goal of this blog is to compile the most common questions we receive and share our thoughts on the topic at hand in a way that a layman can hopefully understand.
We have been doing business valuations for clients for different purposes for a long time. In this blog, we will cover topics such as the basics of valuation, buying and selling a business, the nuances of valuing a business, who is qualified to do a business valuation, and valuation as it pertains to litigation matters. Questions such as why minority interests are worth less than their pro-rata share of company value, how valuation discounts are determined (and what are valuation discounts), why you need a certified valuator to perform your valuation, and how to market and increase your business’ value for a sale are just a few of the topics we will discuss in the future.
So, what is business valuation? In this context, what do we mean by business valuation? Any business? Well, not exactly. One would not need to hire a business valuation expert to value a large publicly traded company because the value of those companies is readily available to the public through stock listings, SEC filings and through simple Google searches. But what about a local business you patronize that you have heard might be for sale? Business valuation in this context is referring to the valuation of closely held companies, or companies that are owned by a small group of owners. The reason a certified valuator is needed in the valuation of closely held companies is because the value of a closely held company is not readily apparent through public information and requires careful analysis of the information pertinent to that company to ascertain value. It requires a combination of experience, training, analysis, access to market resources, and professional judgment to arrive at a reliable conclusion.
Think if you were asked what a friend’s car wash business is worth. Is it worth what he or she paid for it? Is it worth the real estate on which it is sitting? Is it worth something apart from just the assets it owns? The answer could be any one of these or a hybrid of them. Therefore, business valuation as we mean it here is employing widely accepted valuation techniques to understand the business and form a sound opinion of the company’s worth using the best information available. Using a professional who is certified to perform valuations can give credibility to the opinion of the valuator and can provide the user of the valuation confidence that the valuation was performed with high standards.
The purposes for obtaining a business valuation range from curiosity, to want, to requirement (e.g.: for tax purposes), and the purpose of the valuation can significantly influence how the value is determined. The value of a company for inclusion in one’s estate may differ from the value of the company if it is being valued for a divorce or other type of lawsuit. We plan to discuss these techniques and the interesting things we have seen in the field through this blog. We will also cover where valuation techniques can be applied outside the strict valuation of operating companies. Areas such as forensic matters, economic damages, lost wages, and other interesting applications will be discussed as well.
We hope you find our blogs useful. Our goal is to share insight into the valuation of businesses with information that is relatable to the common person and may not be readily available through a simple online search. We welcome feedback. Stay tuned, and we look forward to sharing our worldview of valuation with you.