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What Is the Value of a Business? |
For estate and gift tax purposes, an ideal valuation is one that's as low as possible, to minimize tax liabilities. Expect the appraiser to look for any documentable factor that might lower your company's value.
For sale purposes, well-prepared sellers equip themselves with a valuation that documents the highest possible value.
For financing purposes, bankers will look for a valuation that focuses on liquidation value rather than a company's prospects as a going concern.
For litigation purposes, valuations are a dog-eat-dog business. Set your valuation goals according to the side of the case you're on, but remember that the best investment you can make is a comprehensive, fully defensible document from the most blue-chip appraiser you can afford.
Here are a number of
articles that we have
found while researching the topic of business valuation.
What
Is Your Business Worth
Like other articles on the subject, this one warns that
there's no cut-and-dried answer to the title question. However, a couple
of traditional formulas can still be used to value small businesses,
especially in the traditional economy. Two bases, plus a list of positive
and negative factors that affect the multipliers, are suggested here. And
there's more advice about selling a business on the rest of this Web site.
http://www.businesssalecenter.com/new_page_3.htm
Share
and Share Alike
Business valuation is more of an art than a science, and the way to
determine any one company's value will depend on whether the owners are
approaching private investors, venture capitalists, institutional
investors or the public in an IPO. According to this article, if you're
looking for capital, you should first figure out the amount of money you
want to raise and the amount of equity you are willing to yield. In
addition to explaining the general outlines of this process, the article
suggests books that will help you make the right decisions.
http://www.entrepreneur.com/Magazines/MA_SegArticle/0,1539,2
...
The
Right Price for New-Economy Stocks
For a few heady months, stock-market observers stood on the sidelines
watching Wall Street behave in ways we'd never imagined possible. Stocks
of unknown companies, offering untested (and even undefined) products and
touting hypothetical business models, were all the rage, and in their
frenzy to invest, people were pushing and cutting in line just to get a
piece of the action. Recently, however, cooler heads have intervened, and
now Wall Street is struggling to find a reasonable and dependable pricing
formula for new-economy stocks. The author of this article suggests that
whether or not today's high fliers want to hear it, traditional metrics
still make sense.
http://www.dismal.com/todays_econ/te_042400.asp
Valuation
Of Early-Stage Technology Companies
This article discusses the challenges and difficulties of company
valuation, and it describes several approaches experts have used to come
up with reasonably accurate estimates of company worth.
http://www.houlihan.com/services/Technology/Tech_Valuation/tech_valuat
...
How
Much is Your Business Worth?
This article provides a detailed overview of the various approaches to
pricing a business for sale. Explaining that every valuation is
necessarily a function of its seller's particular circumstances, the
article emphasizes that such events as divorce, death, and partner
buy-outs make it necessary to have established a value for your business.
http://www.webcom.com/seaquest/sbrc/nsworth.html
Company
Valuation
You've built a successful business, and now you’re thinking about
selling it. How do you come up with a realistic price? This article
provides sophisticated, detailed advice about business valuation,
discussing approaches that focus on excess earnings, capitalized earnings,
cash flow, tangible assets, and so forth. A hypothetical example
illustrates each explanation.
http://www.mergers-acquisitions.com/valu.html