Thursday, February 23, 2012

Market Value Business Appraisals

Our business appraisals are written to be easily understood. We use common business terms, comprehensive step-by-step mathematical analysis and a thorough explanation of each step in the process. The result is an easy to read and understand report.

By researching and analyzing business sales to determine components that represent value, we have created an accurate appraisal process. It is realistic and represents true market value. No rule of thumb or comps, our appraisals are unique to each individual business.

By standardizing and simplifying the appraisal process we can offer more affordable pricing for our services.
Business Appraisals 800-829-4842
949-254-4062 Cel
714-639-6085 Direct
Searching for Market Value

There are a number of standard appraisal methods used to value a business that include, Asset approach, Income approach, Market approach (Comps), Capitalization of Earnings and Discounted Future Earnings. Each one of these methods individually does not always represent the true value of a business. We have seen appraisals where the derived value of these five different approaches varied by 500%.

Also used are Rule of Thumb values based on multiples of adjusted profits or percentages of gross sales. The rule of thumb methods only work when there are many similar businesses having the same operating expenses and assets. This doesn’t always happen and when you use the method on more unique businesses it just doesn’t work.

Using Comps tends to give the average value of the compared businesses and not the value of the business being appraised.

Capitalization of Earnings and Discounted Future Earnings are less often used and tend to end up with values far from Market Value.

After working with the standard methods for some time and evaluating what creates value in a business we learned that combining the Asset, Income and adding market influences into a single method gave an accurate market value. Having been involved with our own Business Brokerage for over twenty years we were also able to look at the businesses we sold and adjust and refine the combined method to reflect a True Market Value Appraisal.
Robert Klein