Business Valuation Blog | Understanding Buying / Selling a Company

Business Valuation Specialists LLC

Recent Posts

Tough Roads Ahead: How a Fleet Trucking Appraisal Helps

Posted by Business Valuation Specialists LLC on Aug 19, 2019 8:00:00 AM

Fleet Truck Business Appraisal

The trucking industry today is facing some serious challenges. Between hard-to-find labor, increased fuel costs and new government regulations, keeping your business running is more difficult than ever. Fortunately, a fleet trucking appraisal can help you make your company's operation more agile and flexible than ever before. Here's how you can leverage a fleet appraisal for your company's benefit.


Tough Roads Ahead: How a Fleet Trucking Appraisal Helps

When you run a logistics company, you have a very different set of concerns for your business than other companies may have. You have a significant amount of capital tied up in trucks, trailers and similar equipment. A lot of money goes into paying drivers well to get your freight moved. Bad dispatching decisions waste fuel, time and resources. Changes in government regulations make it difficult to keep up with the latest requirements for your industry. Many of these changes require additional investment in your drivers, your equipment and your business to make sure everything stays above board. This can require securing financial investors or a bank loan to make the needed changes.

However, the value of your business may not actually match up to the value that is in your accounting books. Depreciation tables may have certain assets, such as a long-running semi, fully depreciated while it's still in operation, building value for your company. Real estate assets may have appreciated in value since the time that you purchased them. If there is stronger demand for shipping services, your company's overall value may have increased higher than you may have expected. How do you account for these factors?

You could try to determine the value of all of the separate parts of your business, but that may still come up with an inaccurate figure. Why? The strength of the management team, the goodwill of the community or your company's reputation in the industry are all assets, but ones that are difficult to put a specific value on unless you've had a lot of training in how to calculate those values. These intangible assets can often add up to a significant portion of your company's overall value.

The easiest way to calculate your company's value is to leave it in the hands of a professional business valuation specialist. These specialists have been trained in calculating both the tangible portions of your business - physical assets such as semis, real estate and equipment - as well as the intangible assets, such as brand value, goodwill and reputation. Accredited business valuation specialists use tested methodologies and calculations to determine the overall value of your business, calculations and methodologies that have been tested over the years in a wide range of real-world situations, such as courts, insurance claims, bank loans and tax appeals.

By having a fleet trucking appraisal performed on your business, you can determine what your company is worth, allowing you to then use that estimated value to grow your business, invest in new technology or retain exceptional drivers as trainers. The best way to determine this value is by having it calculated by an accredited business valuation specialist. This ensures that the appraiser is using standardized methodologies that will hold up well to strong scrutiny, whether you need that information for financial, legal, tax or insurance purposes.

Tags: Fleet Trucking Business Appraisal

What Happens to the Business After You're Gone? Estate Settlement Valuation

Posted by Business Valuation Specialists LLC on Aug 5, 2019 8:00:00 AM

estate settlement

When a business partner or owner dies unexpectedly, it's important to decide what needs to happen next relatively quickly. A number of different tasks must be undertaken to stabilize the business as quickly as possible while determining its future course. But if the business is part of an estate that is being split among multiple heirs, determining that direction can be difficult if not impossible. Fortunately, estate settlement valuation can make the process go more easily.


What Happens to the Business After You're Gone? Estate Settlement Valuation

Let's take a look at an example of what can happen during estate settlement. After a business owner dies, his business is to be split between three children. One has spent several years in the business and has a vested interest in keeping it in operation. The second is close to the family but is more interested in receiving their legacy from the business within the next couple of years and wants to sell to the right buyer. The third has been caught up in caregiving for the business owner, is exhausted and simply wants the company sold as quickly as possible, so he can get on with his life.

With these different approaches, the value of the business will vary greatly. The first child will be interested in what the future value of the business will be, which is determined by calculating the income value of the business. The second child wants to wait for the right buyer and expects to receive fair market value for the business. The third child simply wants to be done with the process and will settle for the liquidation value of the business.

The first child could offer to buy their siblings' portion of the business, but that may require capital that the business does not currently have available. A loan could be pursued, but at what value? Future income? Fair market? Liquidation? This is where a business valuation specialist can provide valuable information and insight to help make the process move more smoothly. Having a valuation performed as part of the estate settlement provides a number of benefits to the family:

  • It tells the current value of the business, which may be otherwise unknown, providing valuable financial information to help with the decision-making process.
  • It can provide multiple scenarios, allowing the family to decide whether they should sell now or whether it makes sense to wait for the right buyer to receive a higher offer.
  • It provides proof of value for a financial institution or court of law, making it easier to secure a loan or document value for a court case.

By using estate settlement valuation as a tool to determine business value, you can more easily determine the direction the business should take in the future. However, if you need this type of valuation performed, that doesn't mean you can simply talk to a realtor or other individual who doesn't understand the nuances of business valuation and expect to get a solid calculation that will bear out in reality. For situations like this where legal proceedings may come into play, it's vital to only work with a certified business valuation specialist to ensure that the figures you receive are accurate and will hold up to strong scrutiny.

Tags: Estate Settlement

How is the Convenience Store Appraisal Process Different from Other Industries?

Posted by Business Valuation Specialists LLC on Jul 22, 2019 8:00:00 AM

convenience store valuation

When you own a c-store, have you considered what it's actually worth? If you have an accurate idea of what your business is worth, you can then leverage that value to help build your benefit, whether it's to expand your operation, make needed improvements or add a new location for your company. But exactly how do you determine that value? Read on to learn how convenience store appraisal is completed and how it's different from the appraisal of businesses in other industries.

How is the Convenience Store Appraisal Process Different from Other Industries?

Convenience stores have a number of differences when compared to businesses in other industries. They tend to have a lot of money tied up in stock, require frequent restocking of that stock and deal in numerous small transactions. Location is vital to a convenience store's success or failure, with a good location that has few competitors providing a great income and a poor location with many competitors can end up costing money after the expenses are taken into account.

Because of these reasons, income is often used as an indicator of value in convenience stores. Whether you're considering selling your business or simply getting a loan to improve operations or machinery, knowing the value of your machinery gives you the power to leverage that value into a wide range of options. If you don't know the value of your equipment, you miss out on that advantage.

During the appraisal process, the business valuation specialist will start by learning about your business, including its position in the local market, the past income levels and its overall operation process. This allows the valuation specialist to determine the business' strengths and weaknesses, including areas where the owner can capitalize on the strengths and improve on the weaknesses. They're able to project the estimated income out into the future to determine future value, whether the business has strong regular income, seasonal income from tourism or special events or irregular income that has no regular pattern.

This information is all fed into a number of complex calculations that allow the business appraiser to determine the convenience store's overall value. Those calculations are then used in developing a professional report that explains exactly how that value was calculated, the factors that were involved and the reasons behind the valuation, which can often impact the type of calculation that was used. This is important, as some situations require the appraiser to use a specific methodology, such as using fair market value for some types of court cases. But what about once the report has been completed? If there are areas the owner doesn't agree with, there's time for discussion to ensure that no information has been left out of the report.

By understanding how convenience store appraisal works and how it's different from appraisal performed in other industries, you can gain a better appreciation for the process and the value the appraisal delivers for your business. However, these benefits can only be realized when you work with a certified business valuation specialist who understands the nuances in business appraisal. Make sure that you ask the appraiser you're planning on working with whether they've gone through the certification process, which provides strong education and methodologies that have withstood the test of time.

Tags: Convenience Store Valuation

What's involved in CBD business appraisal?

Posted by Business Valuation Specialists LLC on Jul 8, 2019 8:00:00 AM

CBD Business Valuation

The CBD oil business is booming. As states loosen regulations and more health benefits of the oil are realized on what seems like a daily to weekly basis, many serious financial experts are predicting serious growth for this oil, and the businesses that promote it. Forbes recently cited a study that stated that the CBD oil industry could reach $16 billion by 2025. Another study cited in Rolling Stone is more optimistic yet, predicting a $22 billion industry by 2022. MarketWatch is expecting a 39.5% CAGR. These numbers spell huge profits and success for those investing in this bold new industry. But in this rapidly growing market, how is CBD business appraisal different than appraisals for other industries? Here's a quick look at the process.

What's involved in CBD business appraisal?

CBD oil is still a relatively new prospect in the marketplace, but its popularity is growing on a daily basis. With this strong growth, it's important that you know what your business is worth so that you can use that value to grow your company in a way that is reasonable, instead of risking your investment carelessly. Working with a certified business valuation specialist can help you make this process easier.

To start, a well-qualified business valuation specialist will take a solid look at the market. Though it's very easy, as a business owner, to get caught up in the hype and dream big based on the highest projections, a good business valuation specialist will instead look at the average numbers from a wide range of sources, making an accurate calculation of what your company's value is as well as projections of what your company will be worth in the future.

The appraisal will also look at what your competition is like and how that impacts your market share. This includes other retailers in the area if you run a shop, other websites if you sell online or other similar businesses if your focus is in a different aspect of the CBD oil industry. This allows them to understand whether you'll have competition in your existing market share or whether the lack of competition will allow for further growth.

The valuation specialist also looks at your business finances. This allows them to determine if there are areas where your company's accounting practices are strong or weak, allowing you to make corrections as needed to ensure that your company can see maximum growth in the future. This allows you to get your business into great financial shape so that you have better odds of getting a great loan from your financial institution when you want to expand your business in the future.

By having a solid grasp of what's involved in CBD business appraisal, you can gain a much better appreciation of what your company is really worth, especially with all of the wild speculation of where it's going. This will allow you to better leverage your company's assets and potential into this promising growth, making it easier to improve your company's overall position in the market. However, it's important to make sure that you're working with a certified business valuation specialist who knows how to properly calculate the value of your company using tested methodologies to deliver an accurate picture of your company's financial health.

Tags: CBD Business Valuation

What's Involved in the Process of Valuing a Food Services Business?

Posted by Business Valuation Specialists LLC on Jun 24, 2019 8:00:00 AM

food services appraisal

If you're running a food service business, have you ever considered the true value of your company? If you haven't, that's okay - it's pretty common for companies to ignore the value of a business appraisal until it's time to sell or another serious event in the business' lifecycle. However, valuation can provide you with a range of tools to help improve your business. But what's involved in the process of gaining an accurate picture of your company's value? Here's a quick overview to help get you started with a better understanding of the process.


What's Involved in the Process of Valuing a Food Services Business?

To start, when you contact a food service valuation specialist, you'll be asked a number of different questions about your company and will provide some information about your company's finances and market position. This information gives the appraiser a good grasp of where your company's position is in the market, its place among your competitors and an overview of its financial state. This allows them to make comparisons across the industry and see where your company falls.

Once that's done, they'll take a solid look at the financial data you've provided. They'll notice things that you may not have noticed, such as that part of your huge profits one year came from a specific contract you'd won or the huge expense from buying new equipment to expand your business, and that it may be impacting future growth or income calculations. A certified business valuation specialist has the knowledge and experience to account for these unusual situations and can make adjustments to your books to balance these unique numbers to provide a better view of your overall business value, both now and in the future.

They'll also take a solid look at all of your assets. For example, it's fairly common to depreciate the value of a piece of equipment to zero on the books, even though that equipment will be producing value for your company and actually has value of its own for many years to come. For example, if you purchased an oven for your bakery business ten years ago and depreciated it on a five-year schedule, it will show a value of zero in your books, even though it's still being used to produce goods and could be sold for some amount to someone who is starting their own business for a few hundred or thousand dollars.

The appraiser will also look at your place in the market and how you compare to other companies. Just because a similar company sold for a particular figure a few years back doesn't mean that's what your company is worth! The appraiser will take a solid look at all the similarities and differences to determine what the difference in value is between them.

By understanding what happens when a food service business is appraised, you can gain a better appreciation for the insights that the process provides for your company. However, the depth of insight you're looking for can only be found when you're working with a certified business valuation specialist. If you're not sure whether the professional you're working with is certified, take a few minutes to ask about their qualifications and experience. If they're not certified, they're not using calculations and methodologies that have a strong, tested background.

Tags: Food Services Business Appraisal

How is Non Profit Business Appraisal Different Than Other Valuation Types?

Posted by Business Valuation Specialists LLC on Jun 10, 2019 8:00:00 AM

Valuing a Non Profit Business

When you run a charitable organization, non profit business appraisal may be the furthest thing from your mind. After all, if you're not in it for profit, why does it matter what your organization is actually worth? As it turns out, quite a lot! The value of your non profit provides you with plenty of options in terms of financing special initiatives, getting your tax paperwork completed correctly and so many more important areas. Here's a look at how non profit organization appraisal is different than other types of valuations and how that impacts your company's bottom line.


How is Non Profit Business Appraisal Different Than Other Valuation Types?

Let's start by looking at what a non profit actually is: an organization set up through the IRS that is not focused on making a profit, but has a completely different purpose, such as providing clothing to the poor, helping veterans get back on their feet, putting out fires through a volunteer fire department, spreading their spiritual beliefs or sharing a political message. Any of these organizations do amazing work on a daily basis in making our world a better place.

However, it's important to also consider the financial aspects of your organization. Though you're not focused on making a profit, a certain amount of money must come in to ensure that the lights stay on and outreach can continue. This requires having accurate financial records of your organization's overall value.

This value spreads far beyond simple asset worth, such as the value of your forklift in the loading bay or the printer that is used to spread the word. It includes a wide range of intangible assets as well, such as your reputation in the community and the goodwill that brings about, which in non profit organizations, often translates into donations that help you keep your operation moving.

For these reasons, it's vital that a non profit be valued so that you can leverage these intangible assets. If the bank knows you have a certain amount of money coming in every month and that you're not in debt up to your eyeballs, they're more likely to approve the funding you need to open that new youth center, outreach office or operational loan to keep things moving when money is a little tight. Having a business valuation report available for them to check value against makes this process much easier.

What's more, this information helps you ensure that you're keeping appropriate levels of insurance coverage in place for your organization. Whether it's to take care of lawsuits from that opposing group across town or to take care of costs when your antiquated structure that was donated to the cause burns down, this insurance covers the cost of getting back up and continuing the fight.

Though a non profit business appraisal may be the furthest thing from your mind when you're handing your organization's daily business, it can have a strong impact on your overall operations and your ability to impact positive change in your community and the world at large. Whatever your organization's focus, consider having an appraisal performed by a certified business valuation specialist to ensure that you're able to protect your assets when it matters most, so that you can keep your good work rolling forward.

Tags: Non Profit Business Appraisal

How Does Financial Statement Analysis Benefit Your Business?

Posted by Business Valuation Specialists LLC on May 27, 2019 8:00:00 AM

Statement Analysis

What's your company really worth? If you think it's the amount listed on your latest financial statement, you may be surprised. Many businesses have inaccuracies on their books that they're completely unaware of, inaccuracies that can cause serious issues down the road when you're applying for a loan, making a court settlement or dealing with tax assessment inaccuracies. Fortunately, there's a great tool you can put to use to help find and correct these inaccuracies: financial statement analysis. Here's a look at what this entails, how to implement it and how it can benefit your company in the long run. 


How Does Financial Statement Analysis Benefit Your Business?

When you have your business financial statements analyzed, you're essentially having them audited for accuracy, but it goes beyond that as well. Rather than simply checking that 2 + 2 = 4 or that your books are balanced, the analysis takes a much deeper look at the accuracy of the details on your financial statements over time, then adjusts them accordingly to provide a more accurate picture of your company's overall financial health over time. This allows your income projections, net worth and similar calculations to be done in a fashion that reflects the true situation of your company.

To start the process, you'll need to contract with a reputable, certified business valuation specialist, preferably one who has some experience appraising businesses in your industry. A certified valuation specialist has been through an extensive training process that includes field experience and education in a wide range of appraisal topics, including which methodologies they should use in which situations. These methodologies have been tested extensively in a wide range of real-world situations, such as court cases, insurance claims, tax agency appeals, business sales and securing loans for operations or continued growth.

The appraiser will look at your company's financial records, check them for accuracy, determine whether some assets have been over- or under-valued in your books and otherwise consider areas where your books may not be accurate. As an example, if you purchased a pickup for your construction business and have completely written it off over a five year period, it will show no value on your books.

However, if you continue using that pickup on a daily or weekly basis as a vital part of your business, it still has value. You could sell it, trade it in or possibly even use it as collateral to secure a loan for other business purposes. If that value is not reflected on your books, that's a valuable asset you could tap as a financial resource during a time of need for your business. The business valuation specialist looks at assets like that and includes it in the adjustment of your books to reflect a more accurate financial picture for your business.

By using financial statement analysis as a tool to improve your company's bookkeeping accuracy, you can ensure that the financial reports that you're generating are providing a precise picture of your company's overall financial wellbeing. However, you can't get this analysis performed by just anyone off the street. You'll want to make sure to use a certified business valuation specialist. The certification process ensures that they know which tested methodologies to use in accurately calculating your company's value and the accuracy of your financial statements.

Tags: Financial Statement Analysis

How to Use an SBA Loan Business Appraisal to Up Your Approval Odds

Posted by Business Valuation Specialists LLC on May 13, 2019 8:00:00 AM

sba loan business appraisal

If you're getting ready to apply for a loan through the Small Business Administration (SBA), have you had the opportunity to get all of your paperwork in order yet? If you haven't, you may want to consider SBA Loan Business Appraisal. Why? When you go into the loan process with solid documentation of your company's value, it becomes much easier to get through the entire process as seamlessly as possible. Here's a quick look at the reasons behind why having a business appraisal performed on your business can help improve your odds of approval for an SBA loan.


How Can an SBA Loan Business Appraisal Help Your Odds of Approval?

When you have a business appraisal performed for SBA loan purposes, you're essentially having an independent third party verify the value of your company. This provides the bank or financial institution that you're working with proof of your company's value, whether you're purchasing a new business, refinancing to improve your company's footing or securing a loan to expand your operations. Working with a certified business appraiser ensures that the methodologies that they use have been tested for a wide range of reasons, including financial decisions.

A certified business valuation specialist takes a solid look at your company's financial background, your position in the marketplace, your reputation for innovation in the industry, your competition, your reputation in the community and many other aspects. They consider how your business stacks up against the average, then use that information to determine the value of your company. This is handled through a series of complex calculations that have been tested in a wide range of circles, including financial institutions, purchasing or selling decisions, tax appeals, insurance claims and courts of law, among others.

Once the business valuation specialist has gathered all of this information, they're able to compose the entire body of information into a simplified, standardized report that conveys how these aspects impact your company's overall value. This information, when provided to your financial institution, delivers verifiable proof of your company's value. Because it has been prepared by someone with experience in the standardized methodologies used to calculate business value, the report stands up to strong scrutiny and therefore is usually accepted as proof of value above and beyond any documentation you can otherwise provide.

However, that's not the end of the usefulness of your business valuation report. Once the loan has been secured, you can use the report for any number of other purposes down the road. It can be used to verify your company's average income if you have to shut down due to a disaster and make an insurance claim. It stands as proof of value if you need to appeal a bad tax assessment. It documents your company's worth if you become embroiled in a court case. There are a wide range of purposes for a business appraisal that reach far beyond simple loan approval.

When you get an SBA Loan Business Appraisal, you're able to provide solid documentation to help prove the value of your business. Working with a certified business valuation specialist means that your overall value calculation will be performed using standardized methodologies that are recognized and respected in a wide range of circles, including financial institutions. This helps make your SBA loan approval process go much more smoothly than it may otherwise, reducing the need to provide additional documentation that may hold up the process.

Tags: SBA Loan Business Appraisal

Business Valuation Methodologies: How They Differ in Appraisals

Posted by Business Valuation Specialists LLC on Apr 29, 2019 8:00:00 AM

business valuation methodologiesbusiness valuation methodologies

When you're considering determining the value of your business, you may hear the term business valuation methodologies. But what are they, how do they impact the final calculated value of your company and why is it important to know the differences between them? Here's a quick look at the most common valuation methodologies to help get you started.

What Are the Different Business Valuation Methodologies Used in Appraisal Practices?

Asset-Based Approaches

Asset-based approaches look at what a business already has in terms of tangible and intangible assets and liabilities. These assets are then used to help determine the value of the business.

  • Adjusted Net Asset Value Method - This requires the appraiser to adjust the company's assets and liabilities to their fair market value as of the valuation date. 
  • Liquidation Value Method - When a company is discontinuing operations or restructuring, the proceeds from liquidation are calculated using either an orderly or forced liquidation approach.
  • Book Value Method - Though sometimes used, this method has serious flaws. It's an accounting number based on the value of assets on the books, but when equipment is fully depreciated before it's put out of service, it doesn't reflect a realistic business value.
  • Excess Earnings Method - When a business has significant goodwill or intangible assets, this type of methodology is used to calculate earnings above a reasonable return on the business' tangible assets. 

Income-Based Approaches

Income-based approaches to valuation look at how much money the company has coming in. The appraiser uses that income and projected future growth to determine the company's value.

  • Capitalization of Earnings Method - When a company has a regular income, this method is used to convert the ongoing benefits of that business over an extended period of time to determine the overall business value.
  • Discounted Earnings Method, or Discounted Cash Flow Method - With the terms used interchangeably, this method is used to determine value when a company has irregular income, cash flow issues or inconsistent growth to determine future value.

Market-Based Approaches

Market-based valuation approaches look at similar businesses. The valuation specialist then makes adjustments to value to reflect the subject company's situation.

  • Guideline Public Company Method - Using financial data from publicly-traded companies, this methods uses the actual price investors pay for a minority interest in similar companies to the business being valued.
  • Guideline Company Transactions Method - When companies are closely held, this method is used by using the value of companies with similar characteristics, including industry, size, products, services and location, as well as transaction dates of sale.
  • Multiple of Discretionary Earnings Method - This method takes a similar company and divides the transaction value by discretionary earnings, at which point the subject company's discretionary earnings are multiplied by the same multiple that was calculated.
  • Gross Revenue Multiple Method - This method divides the transaction price by the company's revenue, then similar companies are researched to determine a multiple, which is then used with the subject company's revenue to calculate value. It doesn't account for profitability, however.

By understanding the different business valuation methodologies, you'll have a better grasp of exactly what an appraiser is referring to when they're calculating your business value. This provides you with a much better understanding of the process and calculations involved, making you a much more active participant in the process.

Tags: Business Valuation Methodologies

Why Is Steel Mill Appraisal Important to Your Business' Bottom Line?

Posted by Business Valuation Specialists LLC on Apr 15, 2019 8:00:00 AM

Steel Mill Appraisal

You've worked in the steel industry for years. You know blast furnaces inside and out, and can tell the general history of steel prices for the past several years off the top of your head. Casting and rolling are daily occurrences, and you know exactly what's involved in keeping your continuous production machinery operating efficiently. But one area of your industry that you may not know about, but is vital to your company's bottom line, is steel mill appraisal. But what exactly is a steel mill valuation and why is it so important to your company's bottom line? Here's a look at the entire process and how it can be used as an important business tool to grow your company.


Why Is Steel Mill Appraisal Important to Your Business' Bottom Line?

The first question many people ask when determining the value of their company is, "What is a business appraisal?" Though many companies only have one performed when they're selling their business, a business appraisal can be a valuable tool to help improve your company, allowing you to reduce overhead, increase profitability and grow your business with a great deal of success. But what happens in a business appraisal that allows you to take advantage of the information inside to this degree?

Let's start by taking a look at the business appraiser. This is a highly-trained individual who has spent extensive time in the steel industry, not only with your business during the appraisal process, but with any number of competing businesses, who may have very different processes, procedures and circumstances than your company. This provides them with the knowledge to make valuable insights that can greatly benefit your company's bottom line.

As an example, let's consider the revolution currently taking place in IoT-linked machinery. Is it as prevalent as the machinery manufacturers say? If you upgrade, will you really be getting in at the beginning of the curve, making you an innovator in your industry, or will you be somewhere in the middle, keeping up with the pack. Is it really making as strong of differences in your operation and profitability as the machinery manufacturers are saying? A qualified appraiser can let you know.

What about your finances? Are they in line with other steel mills? One of the first areas considered by a business valuation specialist is a company's financial records and where they may be accurate or inaccurate. Once adjustments have been made, they may be able to advise you whether there are areas that could be improved.

Though a steel mill appraisal can be a complex process, working with the right business valuation specialist makes the process flow much more smoothly and easily. It's also a vital one that can give you the information you need to make significant improvements to your company, such as deciding when to expand, when to consolidate and when to sell. It provides you with vital proof of your company's value for a wide range of purposes. However, these benefits are often only apparent when you work with the right appraiser. A certified business valuation specialist has the right combination of knowledge, experience and expertise to get your company's value calculated correctly and in a fashion that makes the final report bear up well to very strong scrutiny from a wide range of sources.

Tags: Steel Mill Appraisal