Business Valuation & Appraisal Services
Know the Fair Market
Value of Your Business
75% of business owners do not know what their business is worth in today's market
Call Now For A Free Question and Answer Session
Find Out What The True Value of Your Company Is
You know the value of your home,your car, but ask yourself
Do you know the value of your business
Many business owners think they know how much their company is worth but, without a professional business valuation, risk seriously undervaluing their largest asset at exit.
From financial analysis, through highlighting intangible assets, our comprehensive Business Valuation service demonstrates how to value a business accurately, giving you a true reflection of your company's worth.
Monarch Business Valuations Monarch is a specialty business valuation firm, with a practice emphasis on Small and Mid-Size Businesses from Gross revenue (200,000. To 90 Million ), Our experience with business valuation, partnership syndication and real- life experience has led us to be one of the leaders in the industry Our clients benefit from our insight and ability to prove value through an integrated approach to final valuation report.
Business Valuation Certificate Number #CN FN 1025 National Registry of CPE Sponsors #115881 .IRS CPE # 72821.
Certified Public Account Department of Regulatory Agencies Credential Identifier Credential ID 24374
Want to Increase Revenue and Make More Profit Before Selling your Business?
Business Valuations can help you grow and maximize the value of your business. We use one of the industry’s BEST and PROVEN methodologies for uncovering the core inefficiencies your business is facing and then specify the added value for fixing them. We deliver a plan of action that includes detailed tasks that are ready to execute. You will receive the help you need to grow your company to the next level. Our initial assessment provides you with an actionable Executive Report. The report shows what your company is worth, what it could be worth, and how to get there and to learn more about the growth assessment and profit & value enhancement services.
Monarch Business Valuations provides the client with appraisal reports, which are advisory in nature and are used to assess the overall worth of companies in today’s marketplace. Business Valuations are used for many reasons: to estimate the selling price of a business, resolving of disputes related to estate and gift taxation, divorce litigation, establishing purchase price and value of partners' ownership interest for buy-sell agreements, and many other business and legal purposes such as shareholders deadlock and estate contest.
Our Business Valuation Process is Simple.
Step 1. Initial Phone or Face to Face Consultation: We will discuss your industry, why your valuation is needed, and get an understanding of your company.
Step 2. Project Quote: Based on the initial consultation, we will prepare a quote for the business appraisal project.
Step 3. Engagement Agreement: If you would like to proceed, we will send over the engagement agreement.
Step 4. Data Gathering: We will complete our business questionnaire We will gather your 3 to 5 years of corporate tax returns and financial statements.
Step 5. Valuation Analysis: We will take the answers from the questionnaire and analyze the provided company financial statements.
Step 6. Valuation Report and Discussion: You will be given a PDF copy and a hard copy of the valuation report. We can also schedule a face to face meeting to go over the results,
What's Involved in a Typical Business Valuation Process?
When a company calls a business valuation firm, they often don't know what to expect. But from the moment of that initial contact, our Business Valuation Specialist is already gathering the information needed to begin the process. Questions such as why the appraisal is needed, how is the business organized and what are the plans for the future of the business actually play an important role as our appraiser determines what information will come into play during the valuation process.
Why? When a company is being eventually sold or merged with another is a completely different situation than when a business needs to be sold quickly to buy out a partner in a divorce or satisfy estate requirements. In one situation, the business can wait for the right buyer, while in the other, some level of liquidation and compromise will need to take place to meet the timeline set by the courts. But in either case, what will happen next?
Our Business Valuation Specialist will then request some information. Typically, this will start with financial records. This helps our Business Valuation Specialist see where the business stands currently. We look at historic financial statements and adjust them as necessary to gain the best possible picture of your company's financial history. This will help if an income-based approach is used to valuing the business.
But what about your business' reputation for excellence in the community or industry? This will come into play as well. If your restaurant represents the only real place to go for exceptional Italian cuisine and is a hit in the area, it will have a much higher value than an average cafe that doesn't stand out from the crowd at all.
Your assets will also come into play. Do you have an exceptional location for your store or service? This will be reflected in the appraised value as it is calculated by the valuation specialist. If your equipment has been very well maintained and is expected to provide many more years of reliable service, it's worth much more than neglected machinery that will need to be replaced before production can really begin again.
What condition is your industry or market in? Selling a residential construction company right after the housing bubble burst in 2008 wouldn't have gained you much but selling an oil drilling company when the oil fields were just being tapped would have provided a significant profit. When your market is going well, you're much more likely to find a buyer willing to invest.
Though the business valuation process can seem complicated, it really just looks at the information that is available and then determines a fair value for that company. Our Business Valuation Specialist can make this process seem easy because they've spent significant time during the training process learning which approach is needed in which situation. By taking advantage of this knowledge, you can quickly gain important insights into your business' operations, place in the market and potential for improvement.
What is a Business Appraisal?
Simply put, a business appraisal is an opinion of the fair market value of a business (or portion of a business).
Fair market value is the price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, neither of whom are under any compulsion to buy or sell, with both having reasonable knowledge of relevant facts.
Why have a Business Appraisal?
Business valuation engagements are performed for a variety of reasons. Some valuations are required, such as in the cases of estate taxes or marital dissolution, while others arise from the desire to identify a value, such as a basis for a business purchase or sale.
Regardless of the motivation, it is crucial to have a business valued by an appraiser who is proficient not just in analyzing the financial statements but also who has an understanding in converting those accounting numbers into estimates of future performance, which ultimately create the basis for value in today’s dollars.
The most common reasons why a business may need to be appraised are:
* Buying or Selling a Business
* Marital Dissolution (Divorce)
* Estate Planning for Gifts or Inheritance
* Family Limited Partnerships or Limited Liability Companies
* Employee Stock Ownership Plans (ESOPs)
* Litigation Issues involving Lost Profits or Economic Damages
* Stockholder Disputes
* Insurance claims
* Mergers & Acquisitions, Reorganizations, Liquidations, and Bankruptcy
* Charitable contributions
* Allocation of purchase price
* Buy-Sell Agreement
What Types of Valuation Appraisals and Reports Exist?
The most common types of appraisals & reports typically issued are described below.
Different Types of Appraisals (Development): Complete Appraisal: An appraisal is the act or process of determining the value of a business or business ownership interest. The objective of the complete appraisal is to express an unambiguous opinion of value. In a Complete Appraisal we must use every valuation method that is relevant. We recommend this type of appraisal if a valuation has the potential to go to court and if the appraisal needs to be reviewed by others, such as the IRS for tax purposes.
Limited Appraisal.The objective of a limited appraisal is to express an estimate as to the value of a business or business ownership interest, which lacks the performance of additional procedures required in a complete appraisal. The appraiser conducts only limited procedures to collect and analyze the information, which the appraiser considers necessary to support the conclusion presented. This type of appraisal is appropriate for some occasions when a case is not going to court; for example, to assist with structuring a buy-sell agreement between two partners.
Valuation Calculations: The objective of valuation calculations is to provide an approximate indication of value based upon the performance of limited procedures agreed upon by the appraiser and the client.
Different Types of Reports
Comprehensive Report: This report is also known as the formal report or self-contained report. The comprehensive report is the highest- level report that can be provided to the client. The comprehensive appraisal describes the appraisal procedures and the reasoning that supports the analysis, opinions, and conclusions in detail. We recommend this type of report if a valuation has the potential to go to court. Also, if the report needs to be reviewed by others, such as the IRS for tax implications, this type of report best explains what was done and how the value was derived. A comprehensive report can range from 40 to 100 pages.
Summary Report.This report is also known as the informal report or letter report. A summary report contains considerably less information than a comprehensive or formal report. Most of the narrative is excluded, and many sections of the report are brief. Just as the name applies, the summary report just summarizes the appraisal procedures and the reasoning that supports the analysis, opinions, and conclusions. The summary report is acceptable in certain situation in which the user of the report is informed that much of the detail is excluded from the report. This kind of report may be used for planning purposes. A summary report can range from 5 to 25 pages.
Restrictive Use Report.A restrictive use report is even shorter than a letter report and just states the appraisal procedures and opinion of value. Reference is generally made to all of the work that has been done, including the fact that the working papers contain all of the supporting documentation for the appraiser’s opinion. A restrictive use report is restricted to the client as the only user of the report. This type of report can range from one paragraph to several pages.
Oral Report .This type of report can be anything from a quick phone call to lengthy meetings. Some attorneys prefer oral reports in litigation. However, even though oral reports are acceptable, they are not advisable.
Review of an Appraisal: An appraisal review is an opinion about the quality of a report issued by another appraiser. A letter describing the review and critique is typically issued.
The valuation section is the main part of the report and discusses the different valuation approaches and methods chosen.
A valuation approach is “a general way of determining a value indication of a business… using one or more valuation methods.” A valuation method is, “within approaches, a specific way to determine value.”
There are three valuation approaches.
Asset Approach. In this approach, we seek to measure value through the calculation of assets net of liabilities. One can use book or market values of assets in this approach.
Income Approach. In this approach, we seek to measure value by converting anticipated economic benefits into a present single amount.
Market Approach. In this approach, we seek to measure value through comparing the subject company to other businesses or business interests that have sold. Some use information from the sale of private companies, others use the sale of public companies or the price of stock as of the date of valuation for comparable public companies in the same or similar industry.
Commonly Used Business Appraisal Methods
Adjusted Net Book Value Method
The most commonly used method within the asset approach is called the Adjusted Net Book Value Method or Asset Appraisal Method. In this method all assets and liabilities are adjusted to their fair market values, which may be a going concern value or liquidating value, depending on which is more appropriate in the context of the valuation. The fair market value of stockholder equity is then calculated by subtracting the fair market value of the liabilities from the fair market value of assets. This method generally is applicable as the primary valuation approach for two types of businesses: (a) those about to be liquidated, and (b) holding companies whose operating companies are publicly traded.
The major shortcoming of this approach is its ineffectiveness in accounting for unidentified intangible assets, including, but not limited to goodwill and assembled work force value. Therefore to the extent that these assets are missing from a “fair market value Balance Sheet,” the Adjusted Net Book Value estimate of fair market value will be too low. Additionally, it is not always economically practical to calculate the fair market value of every asset and liability, which introduced additional valuation error into this method.
Discounted Future Returns (DFR) Method
Within the income approach, the Discounted Future Returns Method is based on the concept that the value of a business is best measured by the presently estimated value of the net income, cash flow, or dividend streams it can generate in the future. These estimated streams of a business enterprise are then adjusted to reflect the time value of money as well as the associated business and economic risks of that enterprise.
The DFR Method is widely recognized as the theoretically most valid approach. The Discounted Future Net Income, Discounted Cash Flow, and Discounted Dividends Methods are subsets of the Discounted Future Returns Method. One can forecast net income, cash flows, or dividends, and then discount them to their net present value. The Discounted Dividends Method is rarely used, since most privately held firms do not pay dividends. The Discounted Net Income Method is less accurate than the Discounted Cash Flow Method and is used when cash flow information is not feasible.
Guideline Company Method
The “Guideline Company Method” is a method within the market approach, which compares the subject to similar businesses that have been sold. The “Guideline Company Method” involves developing either regression analysis and/or ratios of stock price to earnings (P/E Multiples), cash flow (P/CF Multiples), and Book Value (P/BV Multiples). The stock prices are those of public companies in the same or similar business as the Company. Consideration is therefore given to the opinion of informed investors and what they are willing to pay for the stock of comparative public companies as adjusted for the specific circumstances of the Company.
P/E multiples established in active trading are expressions of what prudent, arm’s-length investors believe are fair and reasonable rates of return for these securities, given the risk inherent in those businesses. A risk analysis is then performed to compare the Company to the publicly-traded firms in terms of size, diversity of operations and products, financial strength, profitability, growth, and other factors recognized as key indicators of risk in order to adjust the P/E multiple.
Control and Marketability Issues
The percentage owned of a business has a large impact on the value. A non-controlling interest is typically worth a lot less than a control interest. A minority interest does not have the ability to sell underlying business assets, nor the ability to force the sale of the firm to achieve liquidity. Minority interests neither have the ability to change dividends or other compensation. They typically have no cash flow from their investments. The control owners are able to divert corporate funds to themselves in the form of high salaries, perks, etc. The business appraiser must determine if a discount for lack of control is applicable, and if so, the magnitude of the discount.
Ownership interests are considered liquid, or marketable if the investors can convert their investment to cash in three days. For instance, interests in the stock market, i.e., interests in publicly-held firms, are marketable.
On the other hand, ownership interests in privately-held companies are considered non-marketable. As part of the appraisal process, the appraiser must determine the appropriate discount for lack of marketability that should be applied to a specific business ownership interest. The level of control impacts the magnitude of the discount for lack of marketability. A minority interest is less marketable than a control interest. Hence, the marketability discount should be higher for a minority interest.
Who Should not Value your Business.
(Beware of agents and business brokers that have a vested interest in you listing your business with them, this is how they make their money. Since they get paid primarily upon sale, for them any sale is better than no sale. Less than honest agents and brokers can over inflate the value of your business, enticing you to list your business with them. They can also undervalue your business to entice as many buyers in an effort to get enquiries. It is surprising how often we have heard of business owners who have made this mistake because they feel that at last they have met someone who really understands how much their business is worth ... when this isn’t really the case.
A full time business broker who has made selling businesses their profession is generally someone that you would like to think has the experience, knowledge, and skills to be able to help you sell your business. As per the previous point, be aware that they have a vested interest in getting you to list your business with them. It is always good to understand how they make their money; often paying up front for a valuation is a better way of getting an accurate one.
Online business valuations.
There are a number of online business valuation tools, the challenge with these are ‘rubbish in, rubbish out.’ The results will vary depending on the quality of the information you put in, but also the rigor behind the actual calculations. For example, a business is more likely to sell for a higher value in a major metropolitan area that is booming, versus a similar sized business in a small regional town that is having it really tough. These online tools won’t disclose how they calculate the value of your business, however based on the type of information that you are required to input can give you some indication of the value of your business.
Newspaper and internet listings.
These give you an opportunity to see what other people are listing their business for sale for, however it does not give you any indication of what the actual businesses sold for. Very often a business is marked as sold with the original asking price still being displayed when in reality the business has sold for significantly less.
Merger and acquisitions specialists.
Usually merger and acquisition specialists get involved with larger businesses. What is very important here is being clear on who they are working for and how they make their money. If you get approached by someone on behalf of another company that may be interested in buying your business it is highly likely that they are working for the potential buyer of your business and have their best interests at heart, not yours.
Sadly, this is one of the most common forms of business valuations. Standing around the BBQ, someone with little or no experience and a very strong opinion will try and tell you what your business is worth. “BBQ stories” often include inflated figures or leave out the details like the payment terms and commitments the seller had to make to get the amazing selling price. Be careful of asking the wrong person for the right advice.)
Who should you contract to do your business Valuation.
Professional Business valuation Firms
With Qualifying team Credentials and real world experience like Monarch Business Valuations
Business Valuation Certificate Number #CN FN 1025 National Registry of CPE Sponsors #115881 .IRS CPE # 72821.
Certified Public Account Department of Regulatory Agencies Credential Identifier Credential ID 24374
Getting an understanding of what your business is worth is important to do early in the process because this is the starting point for many decisions.
Business Strategy Valuation Services
Pre and Post Site Inspection Training
Dedicated Site Specific Supervisor and Staff Organization
Reserved Equipment Assignment
Hands on Executive Analysis
Executive Management Overview
Mid-Level Management Overview
Labor Force Overview
Company/Industry Specific Module Implementation
Established Safety Program Coordination
Established Safety Program Implementation
24-Hour Staffing Instruction
24-Hour Service Department Organization
Weather Advisory and Report Implementation
24-hour / 7 days a week Weather Monitoring Coordination
Back-Up Equipment/Labor Plan Advisory
Environmental and Property Safe Chemical and Industry Leading Technology Analysis