Business Valuation Blog | Understanding Buying / Selling a Company

Your Business Appraiser Does Not Need to be Local

Posted by Business Valuation Specialists LLC on Mar 11, 2024 7:30:00 AM

Small Busines Owner Happy with Business Appraisal

There is a misconception in the valuation industry, which some of our clients express their concern over, that their appraiser needs to be located in close proximity to where their company is situated. It is understandable that a small business owner, who themselves may have several local relationships with their own clientele, would raise this issue; however, the fact is that experienced, certified professional appraisers can effectively value any company, regardless of where it is located, and what local markets it may be operating in.

During the valuation process, a qualified appraiser will work with their clients in a “hands-on” fashion to gather all the specific company information needed to complete an accurate and supportable analysis, and ultimately deliver a full narrative report. Each client has the opportunity to discuss the details of their company that go beyond the black-and-white picture created by their tax returns, income statements, and balance sheets, allowing for reasonable adjustments to be made that paint a more colorful, complete, and truer picture of their business.

The appraiser has access to market and industry data across every region in the country and will take into account the nuances of how the company works within these areas, in relation to their competitors and client base. They will look to understand the specific strengths and weaknesses the business has, as well as their ability to leverage the former and improve on the latter. Future growth plans will be considered regardless of whether they are aggressive, modest, or even negative.

Based on the sum total of the data provided, an educated, trained, professional appraiser considers the same set of consistent approaches and methodologies for every valuation and determines how best to apply and weigh each one specifically to the business. The underlying assets of the company will be taken into account, as well as the specific purpose and effective date of the appraisal.

As you can see, the appraisal process is a collaborative effort that relies upon both the independent valuation professional and the business owner/representative to work together and develop a complete snapshot of the company. By the time the project is over and the report is delivered, it will become clear how well the appraiser understands the business, even though they weren’t local to the area.

Tags: small business valuation, certified appraisal, business appraisers

Be Proactive: Don’t Wait for a Reason to Value Your Business

Posted by Business Valuation Specialists LLC on Jan 3, 2024 7:30:00 AM

small business owner needs valuation by appraiser

With 2024 in mind, many of us vow to change a habit or two and get a fresh start on improving our way of life with the proverbial New Year's Resolution. This change in mindset can often be fleeting when the thought process does not materialize into instant benefits after minimal dedicated work effort. The brain can quickly adjust back to telling you that everything is fine, and you feel pretty good about yourself.

The same can be said for your business where it is much simpler to continue with the old way of doing things, especially when the year-to-year results are solid, and you and your staff seem content with current operations. There might not be any reason to overhaul your business model, however, you can always be more proactive in looking ahead and tweaking a couple of things based on recent experiences and increased knowledge.

One of these adjustments should involve not waiting for a reason to take a concrete look at your company and establish a baseline value, so you can better measure the real worth of all the effort you’ve put behind it over these past years and create a tool that can monitor progress in the future. Obtaining an independent, professional appraisal of your business is always a good idea, regardless of what might otherwise force the need to complete one as part of a pending transaction.

Most business owners wait until they absolutely need to have a valuation done, in complement to such things as bringing in or buying out a partner, a personal divorce, or refinancing debt to obtain working capital. As a result, there is a sudden rush to get it completed, and the added pressure of working through the process can further stress an already time-consuming and tedious situation.

If you have already recently completed a valuation, while using an experienced, accredited appraiser, it is simply a matter of sharing this report with the appropriate parties and immediately checking the box for this requirement. Advising your valuation expert that the purpose is for “internal business planning” will allow you to utilize the report for most of these future developments. Getting into the habit of updating the business valuation annually will make it more certain that the results are current and will be sufficient for any third party to review and consider as part of the larger transaction.

Being proactive is generally considered a benefit in your day-to-day life. Having a similar game plan when it comes to your business is just as important, if not more critical when it comes to continued success.

Tags: Business Appraiser, value of a business, small business valuation, business owners

Business Valuation When Settling an Estate

Posted by Business Valuation Specialists LLC on Nov 6, 2023 7:30:00 AM

Estate Settlement for Small Business Valuation work with Appraiser

When there’s a need to settle someone’s estate, there are a lot of things to consider, and given the emotional component of this difficult and hectic time, it can become overwhelming. If the individual wholly owned or was a partner in a business, you will need to consider placing a value on these estate assets, to properly and fairly include them in the settlement. It’s important to work with an experienced independent appraiser who understands the best methodologies to consider and has no “skin in the game” that might create a biased opinion.

When reviewing the ongoing businesses under the estate, it is also a good idea to look ahead at how you believe the future of the company may be affected by the prior owner or partner no longer being involved. Is there an opportunity to sell the company before the effects of their absence take effect? Are there factors to consider in taking the company forward under new direction or management?

While you’re taking care of the short-term demands involved in settling the estate, discuss these more proactive topics with an appraisal professional who can provide options where the valuation might consider these additional perspectives. It’s often feasible for an appraisal consultant to assist not only with valuing the business as of the effective date under the estate settlement but also look ahead at a more current date for the purposes of a future sale or change in the structure of the company.

Before you decide which consultants to engage with during this trying time, inquire as to their ability to work with you on multiple fronts so you can accomplish more than the immediate objective and determine if they can assist with all or most of the concerns you may be thinking about today.

It’s difficult enough to handle all the tasks involved with settling an estate, especially if the individual owns a large number of assets. The more support you have to accomplish all these, the better your ability to manage everything in a timely and effective fashion.

If you are in the middle of an estate settlement, consider reaching out to professional consultants such as certified and accredited appraisers, who will be there the moment you need the assistance.

Tags: Business Valuation, small business valuation, appraiser, Estate Settlement

Business Valuation Relies on Complete and Accurate Financial Documents

Posted by Business Valuation Specialists LLC on Jul 3, 2023 7:30:00 AM

Small Business Business Valuations Financial Records

If you have owned a business for a number of years and now need an appraisal to sell the company, apply for financial assistance, or bring in new investors, you will need to have reliable financial documentation that provides historical performance details.

The most common records you will need are income statements, balance sheets, and tax filing records. You can provide further information by responding to a series of typical questions the valuation professional will ask during the process, that will give additional perspective on how to view these documents and make discretionary adjustments to the income and expenses of the business.

The appraiser will ask for 3-5 years of these filings, and they should be developed by an outside accounting agency or internal company controller. If you find yourself in a position where these records are not current, or poorly documented, you will need to determine the best way to update them, otherwise, the appraiser may not be able to assist you.

One option is to hire a forensic accountant or bookkeeper who can go through all the business receipts and related paperwork in an effort to develop formal documents which can be utilized for the appraisal as well as support these transactions. A potential buyer, financial institution, or investor is not going to blindly give you funding if the historical performance of the company is not well-detailed and documented.

Keep in mind the appraisal firm you engage with cannot actively participate in the development of these documents since they need to remain independent and unbiased when estimating their value opinions. As a business owner, you will know far more than anyone about the previous performance of the company as well as have access to the records needed to put these documents together. Whether you decide to take this project on yourself or work with an outside agency or internal employee, your direct involvement in the process will be critical.

Regardless of your immediate desire to put the business on the market, or look for new capital funding alternatives, take the time now to review your business records and determine if they are accurate and up to date. Even if they are, take further steps to organize a file to consolidate and provide easy access to, all the historical financial records of the company so that when the time comes, you will be prepared to move forward.

If you are unsure of the steps needed to complete this effort, contact a certified accountant or appraiser who can discuss the process further and give you informal advice that gets you on the right track.

Tags: small business valuation, business appraisers, small business, accounting

Old-School vs. New Small Business Practices - What Works Best For You

Posted by Business Valuation Specialists LLC on Oct 10, 2022 7:30:00 AM


Business Valuation Appraisals Small Business Practices

As a small business owner, I receive dozens of email “come-ons” every month advising me of wonderful new marketing, accounting, hiring practice methodologies, or related services that are supposed to increase my company’s effectiveness and efficiencies, leading to a healthier bottom line.

Personally, I have never followed up with any of these places, however, that doesn’t mean some may provide a useful service for my company. I just happen to be an old-school manager who has people I trust handling these kinds of things for me internally.

As a business owner, you should do what works best for you and your business. Have you been mired in the same processes for years without thinking of new ways to improve your business model? Are you a new start-up, ready to utilize the latest technologies, products, and services available to enter the market running at top speed?

In either case and for most business owners who are somewhere in between these two scenarios, you should keep an open mind about process improvements while continuing to rely on your own experience and expertise, as well as those of your coworkers. If you don’t have certain areas well covered at the moment, such as social media marketing, website development, or accounting software, it may be a good idea to research and engage reliable third-party companies who provide these services or look to hire those with the skill sets required to handle these key sectors of your business.

Consider if your goal is a long-term permanent improvement to your company’s capabilities or a shorter-term fix that can be solved with the help of an outside consultant. Depending on the industry you operate in, products such as accounting, valuation, and inventory management software, might be useful to consider acquiring. Other areas that are critical include marketing, website design, and search engine optimization.

Capitalizing on your past success and old-school work ethic, while staying current with the latest developments and capabilities in the business marketplace, will provide the best opportunity to be successful as you move forward with your small business. Take the time to review the strengths and weaknesses of the key components of your company’s current profile, and look to create a plan that will put you in the best position to succeed today and in the future.

Tags: small business valuation, business owners, small business

Is Your Small Business the Best Version of Itself?

Posted by Business Valuation Specialists LLC on Sep 12, 2022 7:30:00 AM


Business Valuation Appraisal Small Business Best Version

From a personal perspective, we all have stages in our life where we strive to become the best version of ourselves, by improving our overall lifestyle in areas such as health, career, and relationships. Small business owners should take a similar look at their company and ask the same questions. Is my operation the best version of itself or are there ways to significantly improve it in the coming years?

You know your business better than anyone, and like your own life, you can dig deep to break down the areas that can be updated, enhanced, and made more efficient with some introspection, that can be converted into new processes that ultimately increase revenue and net profits.

Some examples to consider:

Overhead Costs

Whether it’s a fixed or variable expense, what areas of your monthly overhead costs can be better controlled without sacrificing quality and efficiencies? Possibly cutting back on expensive trade shows or business meetings where travel costs are high, especially in today’s market. Review everything, from current subscriptions to the employee health care plan for ways in which you might be able to save money while keeping their benefits at the same levels.

Capital Resources

Are their less costly financing options available in the market to restructure your current debt? Would a fresh infusion of working capital allow you to invest in new growth opportunities?

Updating Your Fixed Assets & Maintenance Programs

Is your plant & equipment still functioning at the same levels as when they were originally acquired? Are you spending too much on maintenance as a result of poor operating efficiencies?

Employee Performance Levels

Are you getting the same commitment and output from your staff since the days when they were first hired? Is there room to consider adding personnel in areas that would have a direct payoff to increased revenue or cost savings? Would additional incentives lead to more productivity and increased revenue?

Market Expansion

Are there unexplored markets that complement your key business focus that could lead to additional clients and services? Are you happy with the current market share for the sectors you are entrenched in every day?

These are just a few of the areas to consider when looking to create a new and improved version of your business. Take a deep dive with the knowledge and experience you’ve developed over the years to make improvements and continue to have success.

Tags: Business Valuation, small business valuation, growth, stand out, improvements

How can your company benefit from a small business valuation?

Posted by Business Valuation Specialists LLC on Mar 7, 2018 3:11:00 PM

If you're considering getting a small business valuation, you're not alone. The primary reason small businesses are appraised typically has to do with selling the company or another type of change in ownership, such as passing it to the next generation. But if that's all you use a business valuation for, you're missing out on some serious benefits. Here's a quick look at the many benefits your company can gain outside of the negotiating room.

How can your company benefit from a small business valuation?

It's fairly common for a company to have a business valuation performed when a change in ownership is about to occur. This helps the departing owner know that they're getting a fair value for the business while the incoming owner knows that they're not paying too much for their new business. But the amount of information that is explored during the valuation process makes it an excellent tool to help you gauge whether your company is on the right track and performing up to its potential. How?

The valuation process starts by looking at a company's finances. The appraiser will look at potential transactions that will need to be recorded to normalize income and expenses to reflect the reality of the business, rather than rare high sales and significant expenses that skew your company's financial picture. It also looks at where your company's finances stand overall, giving you a better idea of whether you have a normal number of slow or bad debts from customers or if you need to crack down harder to get paid on time.

Next, it looks at your company's operations.  Is your business a leader in innovation and development in your industry? Is it running efficiently, or are there areas where improvements could be made to optimize your profitability and lower your overhead? The appraiser deals with companies like yours every day, so they can often provide strong, valuable insights into where your operation could be improved to optimize your productivity and profitability.

What about your company's place in the market? That's the next area that is typically explored. Does it have a strong reputation as a thought leader in the industry? Is it unique in particular areas that add value to the products and services you offer your clients? If you do have areas that are similar to competitors, those will be appraised as well as the areas where your company is truly unique.

Then there's the market itself. Is it currently growing, stagnating or shrinking? It's easy to get caught up in what your company has been doing in the market, but it's also important to know where it's going in the future. When the appraiser looks at your industry, they'll take into consideration any professional projections about future growth in the industry.

A small business valuation is a valuable tool that can be used to drastically improve your company's operation, performance and bottom line. However, if you aren't using a certified business valuation specialist for the process, you may be getting the wrong information. The certification process helps educate appraisers as to the proper approaches and methodologies to be used in a wide range of circumstances. Ensure that the money that you're investing in a business valuation is being well spent by using a certified business appraiser.

Tags: small business valuation

Valuing a Restaurant to Determine Your Direction

Posted by Business Valuation Specialists LLC on Mar 1, 2017 10:58:00 AM

valuing a restaurant.jpg

Whether your restaurant isn't doing as well as it used to or if you just want to take it in a new direction and don't know what will work, one way to gain those insights is by having a business appraisal performed. But what kind of information can you discover in the valuation of a company? What's the best way to have a company valuation performed on your restaurant? In this post, we'll discuss the ins and outs of business valuations as they pertain to the eatery industry and how you can use the information you gain to your business' benefit.

Valuing a Restaurant to Determine Your Direction

It could be that your business just isn't doing as well and you don't know why. Maybe you're considering changing to a different cuisine or theme and aren't certain exactly which concept would do best in your area. Perhaps you're getting ready to sell and aren't sure how to market your business' goodwill and reputation in the community. Whatever your situation is, getting a business appraisal is a great way to get a professional opinion about what you can expect in your restaurant.

A business appraisal specialist is trained to look at a variety of aspects in your business. If you've been losing business, is it because of competition or because your business has lost it's newness? A restaurant appraiser knows how to look at your financials to figure out which issue is causing the drain on your business financials. Would a change in theme or cuisine help boost sales or chase away your regular clientele? Instead of simply trying something and finding out later how badly it can impact your business, a business valuation specialist can help you think about specifics ahead of time. 

When it's time to sell your business, what is it really worth to a buyer? If the locals are coming in because it's just the convenient place to go, a buyer may be very interested in purchasing your establishment. But if it's because you've spent years developing the perfect cuisine for the area and a strong reputation in the community, potential buyers may need the reassurance that you'll help with the transition to new ownership. Otherwise they may have concerns about whether the business will remain solvent.

By getting a business appraisal on your restaurant, you'll have access to the best possible insights into what will and won't work to get your business back in shape. If you're not currently working with a certified appraisal specialist for your business appraisals, you could be missing out on the quality insights such an appraisal can bring to your business

Tags: small business valuation, valuing a restaurant