Everything to Know about a Company Valuation Report
Table of contents
- Everything to Know about a Company Valuation Report
- Why do you Need a Business Valuation Report?
- Business Appraisal Report plus Real Estate Appraisal
Why do you Need a Business Valuation Report?
A business valuation, or business appraisal, is the process that determines the current economic worth of a business. To complete the valuation, you will need the help of an accredited business appraiser. They will analyze all parts of the company. Doing so will help determine the value of its components and their sum during the valuation process. This work will be in a business valuation report.
An essential part of the valuation is creating a business valuation report. This document assesses and reflects the true value of a company or its group of assets.
Please read how to obtain a business valuation before selling your company.
Business Appraisal Report plus Real Estate Appraisal
Many times we will combine our fair market value work with a 3rd party real estate property valuation report to give you a comprehensive valuation report.
Read what is a business valuation and what financial analysis it includes about the subject company.
This report is all-encompassing of the enterprise’s true value. In other words, the document offers an analysis of the company’s financial data and insight into the industry and comparable companies.
Read the difference between a business valuation, evaluation, and an appraisal when discovering your business value.
But first, what does a valuation of my business entail?
Although the reasons for obtaining a business valuation may vary, appraisers’ approach to conducting such analysis tends to be standard. In general, the appraiser assesses the financial health of a business by considering many elements. Such elements include the company’s team, assets, earnings, growth, and losses within the context of its specific industry.
There are, however, a variety of methods that an appraiser may use to determine a valuation. If you have a small business, a value plan appraisal will meet your needs for estate planning.
What methods are used in a business valuation?
Each approach is based on varying financial facts and expectations that may result in a different valuation.
- Discounted cash flow approach: This approach is reliable for individuals who want to buy a business. That is because this method emphasizes sales and profit trends that impact a company’s value. This method reflects the amount of capital expected by the investor to reach the market in a few years.
- Assets-based approach: The assets-based approach is the most common way for appraisers to value a company. This is because a company has a variety of tangible and intangible assets that add to its value.
- Comparable or Market approach: With this approach, appraisers analyze the financial worth of similar companies and recently sold businesses in the same geographic area. This method is similar to the comparative market analysis in real estate.
- Income approach: This approach attempts to quantify a business’s value by calculating how much revenue the enterprise will make moving forward. Additionally, it also considers the risk factors involved.
Business Appraisal FL|GA|HI will always use at least six business valuation methods, including book value, the asset-based valuation method or liquidation value, the discounted cash flow analysis, and the market value method, to determine the fair market value of a business.
Your business is more than just a PE ratio. Our business appraisers will make sure you understand the value of your business in the final business valuation reports.
What does a company valuation report include?
A business valuation report prepared by expert appraisers like those at BA FL|GA|HI is comprehensive, detailed, and all-encompassing of the factors that most impact your company’s value.
Business appraisal reports will provide the explanation behind why and how the valuator produced your enterprise’s economic value. This is an essential aspect of the report because soliciting a free valuation, for example, from an online business valuation source, may provide inaccurate values that fail to provide impartiality and depth when determining the business’s actual value.
However, for those who work with experts, a business valuation or appraisal report may need to be more manageable to understand the value of your business.
Here are five things you should look for in business appraisal reports that will help you best contextualize your company’s value.
- Appraisal summary: This part of the document will likely be a table that summarizes the final valuation reached by your company. The table is usually at the back of the report and includes your company’s values and the various methods used to determine such values.
- Summary of approaches and value indications: This summary is highly beneficial to you as the company owner because it will give insight into the various methods used by the valuator. Often, there is an explanation that elaborates on why the valuation uses a particular method over another. Understanding this section will allow you to make sense of the high and low values used to reach the final valuation.
- Normalizing adjustments: These are meant to remove items in the financial statements that are unlikely to occur in the future or are not entirely related to the company’s operations. Examples of events that the valuator might adjust include a sizeable one-time expense associated with a natural disaster that impacted your enterprise.
- Discount rate summary: This summary is helpful to review if your evaluator used the Discounted Cash Flow method to determine your company’s value or the present value of the future cash flows.
- Business validation summary: The total value reflected in the summary often includes any factors the appraiser felt added to or reduced the company’s value. For example, assets and liabilities are usually listed here, which may impact how your enterprise compares to others on the market.
Company Valuation Report Conclusion:
Many factors contribute to the value of a business, and such factors will be summarized in a valuation report. Working with expert appraisers like those at BA FL|GA|HI, thus, guarantees that you’ll walk away with a great understanding of the valuation reached.
The Business Appraisal FL|GA|HI valuation reports can help you make sense of the many factors that impact your company’s value. Whether you are pondering a prospective business transaction, launching into succession planning, or encountering financial distress, our team effectively assimilates the information, makes the tough calls, and renders a robust valuation to help you reach your objective.
Would you like a sample business valuation report with pricing for your company? Please contact BA FL|GA|HI for your business appraisal report needs.