Do you know what you don’t know?
We don’t have all the answers, but we will show you how to find and support your answers to those business valuation questions you are asked.
A business owner may want to sell their business. Are they going to sell the stock, are they going to sell only the operating assets? What if the business’ ownership interest is split amongst other partners?
A married couple may be in the process of getting a divorce. What is the appropriate standard of value to use in cases like this?
Perhaps parents own non-controlling ownership interests in a family limited partnership and want to gift part of it to the next generation. How does one decide what discounts apply and how to support their magnitude?
These are some questions that get asked that we can help answer.
Determining and supporting the value of a business involves multiple variables.
One of the most commonly used ‘Rules of thumb’ for valuing a business is the 5 times EBITDA; Earnings Before Interest Taxes Depreciation and Amortization. Would you be surprised to hear that a 5x multiple is not applicable to all businesses?
Rules of Thumb
Business brokers use Rules of thumb to determine a potential listing price for a business to be sold. When a business is sold, typically the seller keeps the cash, accounts receivable, and any non-operating assets the business may own, while also paying off all liabilities.
When valuing an equity position in a business for any other purpose besides a sale, most of those assets need to be included in the analysis, as well as most of the liabilities held. Those rules of thumb do not provide an indication of value for such an assignment, without adjustments.
We offer the training needed to conclude a supportable opinion of value for a variety of purposes, including transactional purposes.
