Business Valuations

We have the the greatest attention to detail and innovative solutions that only a specialized and exclusive firm can provide.

NYC Business Valuations & Appraisals

What is a Business Valuation?


What exactly is a business valuation? To answer this question, consider the following example. Suppose you hold Apple, Inc. stock in your portfolio and you want to know how much it is worth. Well, all you have to do is pick up your smart phone, run your finance app, and look up the price of APPL and multiply by the number of shares you own. Through this simple exercise, you have valued your Apple, Inc. shares or what you would receive in cash if you sold your shares at that current price.
In concept, valuing your privately-held business is the same as valuing APPL stock. However, because your business is private, there is no finance app or newspaper stock table to which you can conveniently turn. This is where we come in, as there is a pseudo-science, or some say an art form, that provides the foundation for skilled business appraisers to estimate what your business is worth. In essence, business valuation is a process and a set of procedures used to estimate the economic value of your ownership interest in a business.
While a business valuation can take many forms, from something as simple as being a discussion topic in a meeting; or providing summary letters and supporting schedules; or providing a full appraisal report. An in-depth appraisal report is subject to rigorous industry standards and analyzes your company’s financial information as well as qualitative factors (industry outlook, management quality, etc.) to determine its fair market value.
Fair Value is defined as the price a buyer might reasonably expect to pay and a seller might reasonably expect to receive for the subject property, assuming:
  • That the subject property is held for sale on the open market for a reasonable period.
  • That both the buyer and the seller are in possession of all pertinent facts.
  • Neither the buyer nor seller is under any unreasonable compulsion to act, and,
  • That no adjustment shall be made for the non-control status of the subject block of shares.
This definition incorporates the following assumptions:
  • The prospective purchaser is prudent and profit seeking, and without synergistic benefit.
  • The business would continue as a going concern and not be liquidated.
  • The business would be sold for cash or cash equivalent, and
  • The business would be held on the market for a reasonable period of time.
The definition of fair value has been further clarified by the Revised Model Business Corporation Act (RMBCA or the Model Act). This act has been adopted by the American Bar Association’s  (ABA) Committee on Corporate Laws and recommended by the ABA’s Section of Business Law. It serves as a model for many state legislatures in their creation of statutes concerning rights of objecting shareholders to fundamental corporate changes and certain exchanges of shares.
In a fair value computation, the value of the corporation’s shares will be determined:
  • Immediately before the effectuation of the corporate action to which the shareholder objects.
  • By using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring valuation, and
  • Without discounting for minority status.
Item number three above is important because imposing a minority discount on compensation payable to dissenting stockholders for their shares in proceeding under CLS Bus Corp. Section 623 or Section 1118 would necessarily deprive minority stockholders of their proportionate interest in a going concern, and would result in minority shares being valued below that of majority shares, thus violating mandate of equal treatment of all shares of same class in minority stockholder buy-outs.

What are Four Common Business Valuation Methods?

Book Value
Book value is the excess of assets over liabilities, which, when divided by the number of shares outstanding, results in a value per share of stock.

Book Value plus Value of Goodwill
This method measures what percentage of average net earnings are a result of goodwill. These excess earnings are then multiplied by a growth rate based on the number of years goodwill is expected to last. The resulting figure is then added to the book value.

Straight Capitalization
Average net earnings for a designated number of years, divided by a growth rate that represents the average rate of return for similar businesses.

Book Value plus Capitalization of Excess Earnings
This method combines book value, plus goodwill (based on a growth rate for similar businesses) and the capitalization of earnings, to arrive at a current valuation of the business.

 

New York Business Valuations & Appraisals

We are here to serve you and answer any questions you may have.

We strive to provide our clients with the highest quality business valuation services.

We offer the most reasonable prices with speedy delivery.

We have the the greatest attention to detail and innovative solutions that only a specialized and exclusive firm can provide.

We’re here to  provide you with amazing results

Call us today: 1.646.226.1921

We put our customers first. We listen to you and help you find what you need. Come visit to see what we are all about:

  • Getting you a low cost Business Valuation.
  • Valuations for bankruptcy court