November 28, 2018

Business Appraisals

Placing the right value on a business is the single most important part of any successful transaction.

As a seller, providing a professional appraisal to prospective buyers gives them a basis for your position on the value of your business. As a buyer, your negotiating position with the seller is always stronger when you have a professional business appraisal using credible sources to document the value of the business and provide a basis for price and terms discussions. As a borrower, a professional appraisal gives you and the lender a base for the loan and the justification for repayment. Adviser One offers professional appraisals to meet the needs of sellers, buyers, owners and borrowers. Each appraisal is individually crafted and draws from databases of more than 32,000 sold businesses.

What is Business Appraisal?

Business Appraisal is the systematic use of financial and business analysis to produce a professional Opinion of Value. Accurate appraisal comes from a disciplined approach to both current and historical financial conditions as well as locational analyses, ownership, employees, market projections, sales strategies, competition, industry measurements and other key data. Numerous mathematical, financial and what-if models must be employed as well as databases of market comparables, industry statistics, lending benchmarks and other proprietary data banks. Once this analysis is completed, the evaluator can accurately predict what the business, either all or part, will sell for under reasonable circumstances in a reasonable amount of time. Appraisal is both art and science and demands financial acuity, careful decision making and extensive market experience.

What Makes Our Business Appraisals Unique

Experience combines both business analysis with business appraisal to create a comprehensive report. This means we analyze not only the financial performance of the business but look at other variables as well, such as stability of income, cashflow, industry benchmarks, company markets, sales and marketing strategies, locations, management, operations, employees, strategic plans, license requirements, proprietary knowledge and other areas. All of these factors influence value and must be examined when making a value determination. For buyers, these services add value by providing preliminary due diligence that looks at other variables that affect the business. For sellers and business owners, this service provides valuable feedback on how you can enhance or improve your businesses performance to increase value.

Why Should I Have a Business Appraisal Done?

Business Appraisals are essential when you are buying a business, selling a business or obtaining any type of financing. Tax returns typically do not show the “fair market value” due to profit minimization, depreciated assets and no value placed on goodwill or cash flow. The so called “rules -of-thumb” and “industry averages” are not accurate in determining value of an individual privately held business. Appraisals are commonly used in the following situations: Business Sales, Business Purchases, Business Loans, Company Mergers, Estate Plans, Trust Transfers, Divorce of Principals, Litigation Matters, Insurance Claims and Employee Stock Ownership Plans and employee Buyouts. Placing the right value on a business is the single most important part of any transaction.

Business Appraisal Report – Business Evaluation II

Approach: Utilizing the Combined Approach EBITDA and Seller Discretionary Earnings (SDE), we prepare the BV II by reviewing business and operating variables as well as analyzing the Asset Value and Business Value. Asset Value (tangibles) include inventories, Furniture, Fixtures & Equipment (FF&E), Leasehold Improvements (LH), and transferable rights and privileges. Business Value (intangibles) include assessment of customer base, location and improvements, management systems, proprietary rights, competition, free training and consulting time and other key variables. Asset Value and Business Value are then combined to produce the estimated Current Market Value. Ten different methods of valuation are reviewed and weighted to provide an accurate assessment. These include the Asset Method, Basic Method, Capitalization of Earnings, Critical Factor, Debt Capacity, Industry Method, National Method, Weighted Method, Comparable Sales Approach and Multiple Average Approach. A Justification of Purchase is executed to test the reasonableness of the proposed price. A table of Post-Sale Cash Flow, less debt to purchase the business is created as is a Reasonability Analysis to show return on investment and key ratios. The BV II is appropriate for in-depth pricing of businesses where the appraisal demands more than just market comparables. Sellers of businesses use this appraisal to justify a price to Buyers, show return on investment and project post-sale cash flow. Buyers have greater confidence using this comprehensive tool to understand real-world value, return on investment and post-acquisition cash flow.

Report: When complete we issue an Opinion of Value Report that details methodology, pricing and justification in an easily understood, professional format. Best For: Small to medium price benchmarking that considers all aspects of the business and utilizes additional historical financial information. What we need: Interim profit and loss statement and balance sheet, the last three years of tax returns, profit and loss statements and balance sheets, market value of FF&E, leasehold improvements and vehicles, SDE detail and a detailed description of the business.

Special Programs

In addition, we have our Annual Appraisal Program that provides an appraisal each year at a reduced cost, to benchmark your company’s worth and document progress. This is an excellent tool when you are ready to retire and sell your business, or to raise capital as needed

Fast Turnaround and On-Target Appraisals

You’ll be impressed by our commitment to serve you in the most cost effective and time-effective manner possible. Phone 727-647-8529 for further information or to order your appraisal.