Whether you own a small business or a conglomerate, many markets and industries have been significantly affected by the pandemic and more currently, the supply chain shortage, resulting in delays of transactions for a multitude of products and services. If your business model has been greatly altered as a result of these unprecedented times, and you are struggling to adapt to the shifting marketplace, consider obtaining a current business valuation to assist in measuring these changes, and developing a game plan for the future.

A certified business appraisal will also provide you a distinct advantage if you are considering buying, selling, refinancing, or taking advantage of available investment opportunities. The ability to manage your business efficiently and successfully, as the playing field changes around you, is critical to the long-term success of your enterprise.

In today’s challenging economy, understanding the true value of your business will allow you to better recognize and capitalize on opportunities ahead of your competitors. It will also help prevent you from making costly mistakes. Regardless of the situation you’re presently involved in, a certified business appraisal will help enable you to make the best decisions on a day-to-day or long-term basis.

The appraiser will walk you through the process and provide insight as to the information needed to measure the overall value of your company with past, present, and future scenarios considered. As you communicate and collaborate through the process, the business valuation expert will determine the best approaches to consider and ultimately weigh, during the appraisal process. Making the most out of an otherwise negative situation, and potentially capitalizing on opportunities in these difficult times, is part of the formula of the successful, and adaptable business owner.

When a business valuation is conducted for your firm, its assets will be considered in the overall value. If your business appraiser determines that a strict asset approach is relevant to the overall analysis, they will look to understand the market value of tangible items such as cash, receivables, inventory, machinery & equipment, buildings, and land.

If your business is in an active and operational condition, the value of its intangible assets will also be considered. These can include domain names, patents, copyrights, licenses, customer lists, client relationships, non-compete agreements with prior employees, a trained workforce, guaranteed contracts, leaseholds, and general goodwill.

These intangible assets are generally more challenging to estimate value for, as they are not typically itemized on your balance sheet, and need to be reviewed separately to determine a reasonable approach to appraising. The business appraiser will want to review as much internal data as you can make available so they can consider these intangibles as part of the revenue that continues to drive the business. It’s reasonable to look to carve out a value for these intangible assets based on their particular impact on the overall value of the business. The appraiser can provide guidelines to assist in developing historical data and potential growth in the company as a way to measure this in a finite manner.

>As an example, certain contracts and existing client relationships can likely be attributed directly to consistent and tangible revenue the company has experienced over the years. A newly signed contract may open a pathway to future growth that can be measured based on the terms of the deal.

In summary, when completing a business appraisal under an asset approach, it is important to measure the value of all the assets in the company, both tangible and intangible, to gain a complete perspective of the overall value for your business. Working with your appraiser to develop reasonable measurements to value these assets, will result in a credible and reliable outcome.

As we move closer to the “new normal” for business operations in the aftermath of COVID-19, there will be challenges that face both owners and their service providers as to how they adjust their thinking both short and long term. Some of these questions involve the following:

• Should our employees continue to work remotely or come back into the office?
• Will the effects on revenue, good or bad, continue, or was this a short-term blip that will disappear in the next year or so?
• If I want to sell or buy a business in this changing marketplace, what should I consider differently than before?
• How can I take advantage of new opportunities created out of the changing business model?

Regardless of what opportunities or challenges you face today, it makes sense to consider an updated business appraisal as part of the next steps in your ongoing process. It may be that as a potential buyer of a business affected by the pandemic, you see an opportunity to purchase at a distressed value with the plan to reorganize and create efficiencies that will turn the company around in the near future.

On the flip side, if you are compelled to sell your company in the next year, you may need to consider discounting the value of the business and provide seller-assisted financing as part of the negotiation to incentivize a potential purchaser.

Much of the decision-making needs to be weighed against how short or long term your timeline is with taking these next steps. If you have the time to wait out the aftereffects in the hope of normalization, that might make more sense than determining an immediate course of action with many industries still impacted by the pandemic. Not every business owner has this luxury, however, and the need to make sound decisions with several unknowns still out there may require the assistance and guidance of objective third parties that can provide additional perspective on the state of your company.

From a valuation perspective, your research should lead you to engage with a certified business appraiser, with the expertise and experience to determine your company’s current value. These appraisers may have differing opinions as to the factors that will affect value the most, based on their understanding of your financial data and the marketplace itself, so ensure you have preliminary discussions with them before you decide the best fit.

Speak with your accountant as well, who may be able to provide insights into the best approach to working with an appraiser. In summary, the challenges ahead may be many, so try to gather the support you need to make the most informed decisions possible as you navigate the “new normal”.

When you're considering having your business appraised, your research will likely lead you to the NACVA (National Association of Certified Valuators and Analysts), which provides a wide range of services, including certifications, for business appraisers. This designation can make a big difference when it's time to have a company appraisal performed. Here's a summary of what the NACVA is and how appraisers become certified.

Prior to the formation of NACVA, the methodologies used by these appraisers, accountants, and other business professionals followed a wide range of approaches and analyses. There was no consistency in these procedures which ultimately led to scrutiny and doubt as to the reasonableness, reliability, and independence of the conclusions. When audits were performed on a number of the businesses involved, it was determined that formal guidelines and procedures were needed to govern the valuation industry.

In 1990, the NACVA was founded to implement and support the business marketplace. It developed and tested methodologies for estimating business value under a wide range of circumstances. Over time, these methodologies were accepted in accounting, legal, insurance, financial, and tax circles, and were determined to provide the most accurate picture of business valuation. The NACVA has certified thousands of financial and accounting professionals, including CPAs and valuation specialists. The majority of that membership is certified in one of the Association's three main programs: Certified Valuation Analyst or CVA, Accredited in Business Appraisal Review or ABAR, or Master Analyst in Financial Forensics or MAFF.

The independence and consistency of the methodologies required to be considered and implemented in every appraisal under these guidelines have been critical to establishing a strong reputation of integrity. The business appraisal will also include insights into your company's performance and operations, strengths and weaknesses as well as the position within specific markets and industries you focus on.

Becoming a Certified Valuation Analyst within the NACVA involves a combination of education, experience, and formal testing, that takes years to earn. This designation gives the appraiser direct access to the resources of the association and requires them to follow the methodologies and approaches approved within. Continuing education is also a requirement to stay current with changes and updates to the program.

By being aware of what the NACVA is and how its certified appraisers can bring added value to your business, you can use that knowledge and the quality of their reports as leverage at the negotiating table. Working with a certified appraiser ensures that your business valuation has been determined using standardized methodologies that will stand up well to strong scrutiny in a wide range of areas, including legal, insurance, financial, and tax circles.

If and when you start the process of selling your company, the determination of the right price is a critical component. How do you determine a reasonable figure that recognizes all the factors that make up value, including sales, profit margins, marketplace, industry, employees, capitalized investments, expenses, and all the hard work you have put into it over the years? What about the timing? Are you in a hurry to liquidate or do you have the luxury of waiting for several months or a year to find the right buyer?

Here are a few important considerations to take into account that will help get you started:

Don't just base your asking price on recent comparable sales in your local or regional area. Every business is different, regardless of its similarity to other companies. Yes, you should take time to review these as a possible source, however, there are likely differences to consider, including reputation, goodwill, number of years in operation, annual sales, location, and other factors that can affect the overall valuation of your particular business.

If you're thinking about selling your business within a short timeline, 60-90 days, for example, you likely won't be able to realize 100% of the fair value. You may need to settle for a lower price given the limited exposure in the market and less interest generated as a result. Unless you can afford to extend the marketing plan for a longer period, you will need to temper your expectations and adjust the price you are willing to accept in this scenario.

Is your business in a specialized market? How many potential competitors or investors in your industry can you think of that may have an interest in acquiring your company? This factor can work both for and against you. For example, if you are one of several similar businesses in your marketplace, you may be able to quickly find a potential buyer, however, the price level may not be as high or negotiable as you would like it, given the number of competitors. On the flip side, if you have a unique operation that only a few other companies may show an interest in nationwide, you can take advantage of the specific intangible value your business will bring to a buyer but it could be a more difficult negotiation trying to place a value on the many variables at play.

Regardless of where your company falls in this framework, it is important to obtain an independent business valuation to arm yourself with a supportable unbiased assessment you can disclose to buyers at the right time. This step should be taken as early as possible to better enable you to understand the right approach to setting a price to sell. A business appraisal also provides you with insights into your business, including areas that need improvement as well as the strengths that drive value. You may even want to take the time to make certain changes in company structure as a result of the valuation and then determine the right time to go to market. A business appraiser can also provide insights into the current market and industry, which may influence your timing and decision-making.

By considering these factors before entering the resale market, you can determine the best approach to selling your business at the right price.

Valuation is essential during an acquisition, regardless of which side of the deal you find yourself on. The acquisition process can be lengthy, and there are several things you will need to prepare for, including engaging a certified appraiser to complete a current valuation of the business.

Documents at the Ready

On the seller side, the overall process will go more smoothly if the company’s financial statements, taxes, and related business documents are organized and ready for review. This will give the buyer the utmost confidence that they are making the right decision moving forward with the transaction. It will also create an efficient and effective transition.

These steps greatly assist in the appraisal process as well and can ensure the valuation is being analyzed with every piece of data available.

Work with Trusted Associates

You can't go through an acquisition alone, so before you seek buyers, find the right people to help you through the process. This may include a business lawyer, a tax adviser, a financial professional, and a certified business appraiser. These partners can help you manage expectations throughout the acquisition process and take some of the detailed busy work off your plate.

While your associates are assisting you, take the time to do your own research to better understand the market and how your company fits into the larger industry picture. Seek to view the transaction from the buyer’s perspective. This may include a review of any similar deals in your markets and other companies that commonly acquire in your industry.

Don’t Put Off the Appraisal

As a business owner, you are probably a little biased in calculating your company's value. You may be emotionally attached and not looking at the situation objectively. An independent valuation of your business will help you see things subjectively, so you can better understand a realistic range of value in the current market. Review the appraisal carefully and don’t be afraid to ask questions about the valuation. When you understand why your company was appraised at a certain price and what factors affect value, you will be a stronger negotiator.

In summary, by taking these steps before an acquisition, you can put yourself and the company in the best position possible, while navigating each step of the acquisition phase with confidence, thus maximizing the chance for success in the ultimate transaction.

There are different ways to perform business appraisals. Whether you're hoping to buy an established company and get into business for yourself or sell your company for a fair price, it's important to know the different approaches to valuing your business and which one is the most appropriate for your situation.

Pros and Cons of Market-Based Business Valuations

A market-based business appraisal makes sense for many industries. Consider the owner of a semiconductor manufacturer located in California who wants to sell the company and retire. If there are other businesses nearby, operating in the same or similar marketplace, a business appraiser can compare the subject business being sold with others like it, getting an idea of the market share and competitive advantage of the business.

A “Gross Revenue Multiple Method” may work in these cases. Under this method, the appraiser takes the transaction price and divides it by the revenue. They then find similar companies and determine a gross revenue multiple. This multiple is applied to the target company's revenue to roughly estimate a business value. This method is simple and quick, however, far less detailed than other appraisal methods, and often best for preliminary measurement purposes only.

Pros and Cons of Asset-Based Business Valuations

An asset approach estimates how much it would cost to build a similar business from scratch. In this type of valuation, the professional appraiser will estimate the total assets and liabilities of the business. Subtracting liabilities from assets, the appraiser will come up with a valuation.

This method works well for companies that have significant physical assets. However, companies that have intangible assets find that an asset-based method may not accurately reflect their worth. Consider the example of an innovative engineering firm. The imaginative engineers who come up with elegant solutions to problems are not captured as “added-value” in an asset-based approach. If the engineering company was sold to a new buyer, but the existing staff quit, much of the company's true value would be irretrievably lost.

Pros and Cons of Income-Based Business Valuations (The “Discounted Cash Flow” Method)

If your company has a stable earnings flow, then the “EBITDA”, (earnings before interest, taxes, depreciation, and amortization) can portray an accurate business valuation. Since this provides a snapshot of the business valuation at one point in time, it might not be the best method if earnings are projected to spike or if the company is experiencing a slow quarter.

If the business is going through an inconsistent period, the discounted cash flow method may work well. Here, the appraiser estimates the future benefits of the company, then converts them to present value to come up with a fair market value.

Ultimately, a certified, experienced appraiser can determine which method makes sense for any given company at a given point in time, and reasonably estimate the company’s value, while explaining the process to key investors and owners. Given all that is at stake when considering selling your business, it's critical to hire a certified business appraiser who understands your industry.

When you need to have a business valuation performed, a reputable valuation firm can provide you with significant insights into your company that in turn, can offer a wide range of benefits to your business. But what exactly happens when you're working with a valuation firm? What can you expect from a certified business appraiser? Here's a quick look at what takes place when undergoing a business valuation

To start with, a quality business valuation company will look at much more than just the basics of your business and its financial health. They will complete a comprehensive review of the industry and what factors may affect your business's ability to perform in the marketplace. They'll take a solid look at the risks and rewards of certain growth plans and provide you with a detailed report of what your business is worth along with areas in which it is strong and in those which could be improved.

Here are the typical steps that are taken in the process:

1. The appraiser will gather basic information about your business. This will include the type of business, availability of key information, potential areas of importance to the business valuation. The purpose of the valuation is also determined, as particular types of appraisals are required for different situations.
2. The business valuation appraiser will then provide a proposal including the timeframe expected for the appraisal report and the cost expected. They will also request all internal documentation for the valuation, including financial data, asset information, and data on specific areas that may be unique to your business.
3. Next, they will take a look at what aspect of the industry your business falls into and what portion of the market share it holds, while examining key areas including finances, overhead costs, regularity of income, the actual market value of assets, and related documents. Intangible factors such as your reputation in the community, the desirability of the business location, and unique facets of the business will also be taken into account.
4. Using all of this information, the certified appraiser will develop their analysis and issue the formal report. This report utilizes standardized, accepted methodologies and is designed to stand up to scrutiny that will hold up in insurance, tax, and legal circles.
5. Once the report is issued, it will be reviewed with you to ensure it is an accurate reflection of your business and potentially make adjustments for any new details not taken into account.

By better understanding the process, as summarized above, you can better prepare and know what to expect when a business appraiser begins working with your firm. If you're not currently working with a certified business appraiser who has experience in your industry, please contact us and we will get things started for you.

When you've worked hard to position your business for expansion, it's difficult dealing with the likelihood that not everyone sees the potential growth right now, when you most need them to. If you need to get more today for your business' future plans, you need partners who can help you obtain everything you can in today’s market.

Valuing a rapidly growing company is a challenge, but well worth the effort when it's time to consider a new investment, or possibly merging with another operation. The same can be said for those looking to invest in or even purchase the business.

There are several reasons you see the potential for rapid growth in your company. New market expansion, increased product and service demand, higher commodity prices, and changes in your operating efficiencies are just a few. Whatever the reason, your company is growing, and you want to take advantage now. Where do you go to make that happen?

A common, less effective way is to simply discount the value of that growth over a short-term, fixed future period, ultimately dictating a lower than expected business value thus, receiving less consideration than you should. On the flip side, you may overestimate the growth rate, and over-leverage your position as the value is not supported by realistic growth expectations.

The best option is to hire an experienced, certified appraiser to perform a company valuation. One who has experience in your industry and with growing markets in general. But what does that appraiser base the company's value on? Here are a few areas they typically consider:

• Future Earnings: How much is the business forecast to earn over the next several years? If it's realistically and materially higher than in the past, it will be taken into consideration when determining current business value.
• Market Conditions: Is the market booming, with many businesses within that sector seeing strong returns? If so, how long is this trend expected to continue? Much like the housing bubble and the dot-com crash, trends may change, though strong companies that are well managed through may expect to see a stronger market share in future upswings.
• Innovation in the Industry: Is your business viewed as a leader in innovation or does it create the same basic products and services as every other company across the industry? If you have a history of innovation, it can be reasonably expected that your growing company will continue to see strong growth, supporting a higher value.
• Goodwill and Reputation: Does your business have a reputation for excellence in the industry? A strong reputation can make a huge difference between reliance on one-off sales or loyal, committed customers who come back for your services and products time and again.

The work you've put into your business to prepare for expansion and take advantage of opportunities as they've arisen deserves to be recognized and rewarded, and valuing a growing company is a great way to substantiate that effort. A certified business appraisal conducted by an experienced valuation professional lets you take advantage of these future earnings, allowing you to benefit today from the forecasted plans.

How is a Private Medical Practice Valuation Different From Other Business Valuations?

There are a number of factors that impact your private medical practice's overall value. To start, what is your company's reputation in the community? If your business has a reputation for exceptional patient care, unique approaches to treatment or being able to provide at-home care for patients, these types of factors can greatly increase your company's bottom line. Why? This type of treatment is often sought out by those who want to make sure their family is well-cared for, to seek out treatments that are not commonly offered or to avoid having to move a sick child to have an evaluation and treatment plan developed.

What about the people who make your private medical practice exceptional? If you have top-performing doctors and nurses, you'll often have a larger following and will have people flock to your practice to receive treatment from these individuals. By comparison, if you have poorly-performing staff, patients may be reluctant to seek treatment at your facility, lowering your company's overall value due to lower demand.

Are you in a rural or urban area? Specialist medical practices in urban areas are often worth more than a general practice in a rural area, partially due to the availability of local patients as well as the demand for specialty treatments. However, many rural private medical practices have lower expenses and may have a devoted following, especially if the main practitioners have been a part of the community for many years.

How up-to-date are your practice's assets? If you have out-of-date equipment or are unable to keep up with changes in technology due to budgetary constraints, patients may seek care elsewhere to receive more exacting imaging and test results. However, if the race to have the latest and greatest equipment has put your practice into debt, that may result in a lower overall business value.