EDITORIAL FEATURE
Business Valuation....
What is the Market Value of Your Business?
By Jeffrey D. Jones, ASA, CBA, CBI
D
eveloping a business appraisal is a complex process requiring the services of a professional business appraiser.
Thus, your best source for determining current market
value is to employ the services of a knowledgeable, experienced professional business appraiser who is designated by
one or more of the major appraisal organizations.
An appraisal is an estimate or opinion of value using asset-based
market and/or income approaches in conjunction with various
valuation methods as of a specified date. Rules of thumb can be
very misleading and reliance on business advisors who lack appraisal skills can result in inaccurate values. A “guess” may not be
sufficient for your needs. Public sources may quote average prices
for public companies but most small and midsize businesses are
not comparable to publicly held firms due to differences in liquidity, management structure, and depth of services. When you need
to know the market value of your business, the following circumstances call for a fully supported written appraisal report:
• Selling your business -- When it is time to retire or move
on to other investments, knowing the current market value
can help you sell your business at the market value and negotiate a sale more quickly.
• Buying a new business -- Whether buying your first business or growing by way of acquisition, knowing the current
market value will provide you with the information necessary to negotiate a reasonable transaction and avoid offerings that are overpriced.
• Buying insurance for buy-sell agreements or key man
protection -- Establishing current market value will ensure
that you have the facts to purchase sufficient coverage.
• Litigation issues -- Determining economic damages and
bankruptcy issues, resolving shareholder/partner valuation disputes and material dissolutions all call for a fully
documented appraisal report specifying a value that will
hol