Twelve Days of Business Valuations
We’d like to wish everyone a joyous holiday season and prosperous New Year in the best way we know how – by mixing some traditional concepts with a holiday classic. Forthwith, we present to you “The 12 Days of Business Valuations.” On this 12th day of Christmas, let us present to thee, some of our most memorable blog posts, valued content, and Frequently Asked Questions of 2014:
12Trailing Months of Financials
What is a TTM statement? In all engagements, we request three years of historical financials as well as the most current trailing twelve month performance. We believe it is integral to get a picture of the current performance spanning a year in order to incorporate any seasonality during a specific time of the year. We mentioned seasonality in our Halloween feature here: https://quantivevaluations.com/enter-risk-key-factors-consider-valuing-business/
11 Reasons to get a valuation –
(https://quantivevaluations.com/our-services/) We have performed hundreds of valuations over the years spanning many industries and for varying purposes. Overall, the following are the most common reasons clients and their advisors seek valuation analysis from Quantive:
- Supporting Buy-Sell Agreements to Include Buy-ins and Buy-outs
- Shareholder Disputes
- Valuations for Divorce Proceedings
- Operational Due Diligence/Gap Analysis to measure the effectiveness of Company operations and new initiatives year over year
- Exit Planning Considerations in Preparation for an Eventual Sale
- Purchase & Sale of the Business when Timing is Right
- Estate and Gifting Strategies as well as in Support of Probate Requirements
- In Support of SBA Financing (compliant with all SBA SOP’s)
- Funding Key-man Insurance Policies
- Funding Buy-Sell Agreements
- Lost Profits and Damages Analysis
10 Members of Your Professional Advisory Team
(https://quantivevaluations.com/infographic-exit-planning-team/) We spent considerable time explaining the importance of each business owner arming themselves with an all-encompassing advisory network team including the following:
- Family Law Attorneys
- Estate Attorneys
- Corporate Attorneys
- Financial Planners/Wealth Managers
- Advisory Boards/”Improvement” Consultants
- Business Broker/M&A Intermediary
- Valuation Experts (from Quantive of course!)
9 Ways to stay connected with your Q team
We’ve expanded our marketing efforts this year in order to be able to provide you with more content and insight into exactly what it is we do! Find out more about Quantive through:
- Our Website
- Blog Posts
- Monthly Email Newsletters
- Quarterly Mailings
- Team Member’s LinkedIn Pages
- Company LinkedIn Page (Start Following Us!)
- Give us a Call
- In the NY/NJ or VA/DC area…let’s grab coffee!
8 Factors influencing value
As stated in Rev. Ruling 59-60 – There are many potential factors that can influence the value of a firm; however, eight factors are given preeminence in Revenue Ruling 59-60:
- The nature of the business and the history of the enterprise from its inception
- The economic outlook in general and the condition and outlook of the specific industry in particular
- The book value of the stock and the financial condition of the business
- The earnings capacity of the company
- The dividend-paying capacity
- Whether or not the enterprise has goodwill or intangible value
- Sales of stock and the size of the block of stock to be valued
- The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter.
7 Guest bloggers & interviews
Providing unbiased insight – Did you catch all of our guest spots this year? If not, click the links below:
- Steve Bienko
- Erik Fromm
- Renata Sternfeld
- Matthew Glover
- Kevin Ryan
- Catherine Portner
- David Rodeck
6 Stand out reasons to work with us
Just some of the reasons why engaging with Quantive just makes (dollars and) sense:
- Fast Turn Around – Work in, work out. We strive to get appraisals turned around as fast as possible. Most engagements are completed in under 3 weeks.
- Certified – Every reports we produce is certified and each analyst has obtained a CVA.
- Experienced – Our analysts have a minimum of 5 years of experience in the valuation field on top of broader, relevant business experience.
- Nationwide Coverage – We are able to complete certified business valuations in every state.
- Plays Well with Others – Most of our work comes from referrals and as such, we make sure to provide a high level of service that reflects the value a “center of influence” would place on each client relationship.
- Independent – We’re an independent 3rd party. We don’t perform tax or audit work. Because of that, our view point is always highly trusted and well regarded.
5 Factors contributing to your discount rate
In developing the discount rate utilized within our Income Approaches, five components are added together within the “Build Up” process. They include:
- Risk Free Rate – 20 year US Treasury Rate as of the valuation date.
- Equity Risk Premium – From the Ibbotson SBBI Valuation Year Book.
- Industry Risk Premium – Also from the Ibbotson SBBI Valuation Year Book.
- Size Premium – You guessed it…from the Ibbotson SBBI Valuation Year Book.
- Subject Company Risk – Developed by our analysts and detailed in a Risk Factor section.
4 Adjustments for EBITDA
EBITDA is defined as, “…essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.” Again the four elements adjusted in order to calculate EBITDA from Net Income are:
3 Method Approaches
The three approaches are the Asset, Market, and Income Approaches. It is important to note that under guidelines set by the “The Uniform Standards of Professional Evaluation Practice” (Standards Rule 9-5), the Internal Revenue Service (Revenue Ruling 59-60), as well as the National Association of Certified Valuation Analysts’ (“NACVA”) practice standards, the evaluator is required to use all approaches for which reliable data is available and applicable.
2 Discounts to Value
Two key discount considerations, a Discount for Lack of Control (DLOC), and Discount for Lack of Marketability (DLOM), must be reviewed in valuing privately held/closely held businesses as well as minority ownership interests. These discounts take into consideration the difficulty associated with transferring a non-marketable and/or non-controlling ownership interest within the private market.
1 Valuation Firm to Do the Job Right
Need we say more? If so, give us a call and let’s chat in the New Year.
Once again, Happy Holidays from our family to yours!