Valuation of a Business
Similar to getting a real estate appraisal or checking the value of your stock, you can determine what your business is worth by having a valuation prepared by an accounting professional. A business valuation is the analytical process of determining the current or projected worth of a company. It can help determine where a company stands in the market.
There are a number of reasons why one would be interested in getting their business valuated. A common reason is ending cycles such as disputes with partners, divorce or if you are planning to sell. There are several tax reasons as well, such as if a business is being audited by the IRS. Business owners may also have contractual obligations to measure a company’s success or to use as a metric for planning. The value of a business helps business owners hit key targets towards a future goal.
At Murtha & Murtha, we complete two levels of business valuations. Certified valuations provide a fixed value that can be recognized legally. These types of valuations are required by the IRS, used as evidence in legal cases or for contractually obligated valuations. If your intentions align more with selling your business or just checking in on how it’s doing, we can also prepare a Market Value Estimate (MVE). This format is comparable to a Comparative Market Analysis (CMA) used by real estate professionals.
Our business valuations are formed by three parts. First, we take the market approach and determine the value based on cash flow and assets. We will then assess the risk rate. Multiples are calculated for comparable companies using the same financial metrics. Finally, we’ll shift the perspective into a real-world scenario. We call this a sanity check. We look at factors such as a potential buyers salary, loan and investment return to see what a bank would be willing to lend them.
As members of the National Association of Certified Valuators and Analysts (NACVA), we are prepared to help you meet your business valuation needs. Whether you’re selling your business or just interested to know it’s worth, our certified accountants are here to assist.
