Business Valuation Basics With Paula Carr

Last month we gave you a rundown on what happens when a business owner decides to sell their business and you can find that article here. As promised, this month we’ll be shifting our attention to understanding the basics of a business valuation. To begin, a business valuation is an independent and unbiased process of determining a supportable opinion of the value of a business as of a specified date. Sooner or later, every business owner will need to get a business valuation done. However, it is advised to have an updated business valuation report on hand at all times.

There are numerous circumstances that would require someone to need a business valuation. For example:

The sale or acquisition of a business
An exit strategy
Liquidation
To obtain a loan or financing
Restructuring from “c” to “s” corp
Valuing intellectual property
Shareholder disputes
Retirement planning
Life insurance
Buy/sell agreements
Employee stock option plan (ESOPs)
Prenuptial agreements
Divorce proceedings
Litigation
Gift and estate taxes
Partnership agreement

Whatever the reason you’re seeking a business valuation for, it’s important that you choose to work with qualified professionals who are in compliance with the industry’s standards. The professional appraisers at Murphy Business and Financial – Carolinas perform their duties within the requirements of Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP) as well as the Business Appraisal Standards of the Institute of Business Appraisers.

Similarly, it’s important to note that there are also multiple types of business valuations that can be done. The type that may be useful to you, can be determined by the reason you’re seeking a business valuation in the first place. At Murphy Business and Financial – Carolinas, we offer:

Broker’s Opinion of Value – The Broker’s Opinion of ValueTM (BOV) Report is a small business pricing report. The BOV report is used by buyers, sellers, and business brokers, etc. to determine reasonable selling / listing prices for small companies

Calculation of Value Report – A report that presents a calculated value and is compliant with the standards of the Institute of Business Appraisers (IBA) and National Association of Certified Valuators and Analysts (NACVA)

Business Appraisal Report – This formal comprehensive report is suitable for litigation support and review by third parties such as the IRS. The report explains in a step-by-step manner what was done and how the value was derived

Business Valuation Report – A formal summary report that is used primarily for non-litigation situations. This restricted-use abbreviated report is typically all that is needed for determining the selling price of a business or assisting in establishing a buy-sell agreement between partners/shareholders.

In order to accurately do a business valuation, there needs to be a level of understanding about the industry that business is a part of. At Murphy Business and Financial – Carolinas, we have a foundation of people who have represented every industry across the board, so when you work with Murphy Business and Financial – Carolinas, you’re exposing yourself to a bigger organization with various resources that can be beneficial to you.

The experience of working with the professionals at Murphy Business and Financial – Carolinas is different because you’re working with people who would’ve been in your position at some point in their lives. Our team is comprised of business owners who have gone through the process of building a business from the ground up. With the understanding and respect of what it takes to be a business owner, they approach each client with the efficiency and helpfulness they would want if they were in your position.