Errors made in business valuations – what you need to know

There are many errors made in business valuations. This is in part because almost all businesses are bought and sold via the term “EBITDA Multiplier” (Earnings before Interest, Taxes, Depreciation, and Amortization).

Out of the nine different valuation calculations, I use three established valuation methods:
• Asset Method
• Market Method
• Income Method

Terms can be beneficial when working with a valuation professional.

Business Valuation

When is a Valuation Needed?

• Merger/Acquisition
• Financing Sale/Investment
• Estate & Gift Taxes
• Purchase allocation/Fairness Opinion
• Employee Stock Option plans
• Life Insurance/ Shareholder Agreements
• Tax vs. Value Considerations

To better understand the above, take for instance the first valuation process, merger/acquisition. For a merger or acquisition transaction, it is critical that multiple method valuations be completed. KNOWLEDGE IS POWER. If just an Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), the multiplier is used, what data do you have to increase your knowledge or negotiation power? None.

You have to look at each point above in detail.  As a professional valuator I can walk you through the step

What is Business Valuation Dependent Upon?

• The Purpose of the Valuation
• Market Conditions
• Comparable Companies
• Risk Factors
• Business Financial History & Projections
• The Cosmetic Business Appearance
• Management Team
• The Business Appraisers Perspective

Excel, Dale Richards, Valuation Expert helps the client to understand the process. Tammy from Asphalt Materials, Salt Lake City, Utah, contracted Dalel to valuation their business for possible acquisition. She was very pleased with his understanding and help.