The valuation standards that all valuations need to meet are the following:

• Uniform Standards of Professional Appraisal Practice (USPAP).
• IRS Ruling 59/60.

Regardless of any other certification that a valuation specialist might have, every valuation that is done needs to meet these 2 standards.

Generally, 4 to 6 weeks; but if your specific situation demands a more aggressive timeline, we’re open to discussing it.

Not necessarily. The role of a business valuation specialist is to provide an unbiased opinion as to the value of a business interest; the results of the valuation may or may not work in your favour, depending on the specifics of your situation, but it is never/should never be the goal of a valuation engagement to achieve a result that the client wants/needs.

While there is not a prescribed length for a valuation report, it covers several subject areas: for example:

• A description of the business.
• The current state of the economy and how that might impact the valuation.
• A summary of the financials of the company.
• An analysis of all valuation methods considered and their results; and
• An overall conclusion of value.

Satisfactorily covering all of these areas can result in a report that is 50 pages or more.

Yes. Our valuations are frequently used as evidence in court cases. And if it becomes necessary, we will defend our findings under oath in court.

Not necessarily. In most cases, it makes more sense for there to be one objective, unbiased expert who will perform a valuation of the business; this is a less expensive and less confrontational pathway, and if the communication with the other party is such that this can be agreed to, it usually makes most sense.

Yes. We can review the results of another expert’s work; we will advise as to whether it meets the standard of a business valuation, given the specifics of the situation. If it does not meet the standards for whatever reason, we can express our opinions in the form of a formal rebuttal report.

Yes- we do valuations of businesses in different states fairly regularly.

It is helpful to visit a business that is being valued, but not 100% necessary. Access to the financials of the business; access to communication with the principals of the business; and an openness to requests for information, are all more important than an actual site visit.

Fair Market Value is a standard of value that applies to many valuation engagements. In layman’s terms, it means the price at which a business might be sold, when both the buyer and the seller have full knowledge of all facts regarding the business, and neither party is under any compulsion to conduct a transaction.

Generally speaking, valuation methods as simplistic as the one described here (sometimes referred to as “back of the napkin” valuation methods) are only good enough to establish a high-level possible value of the business entity. Most valuations require a greater level of scrutiny and detail than the “quick and dirty” methods; and if your valuation needs to be part of a court case (such as a divorce or a business dispute), this type of approach is woefully inadequate.

Valuation methods generally fall under 3 broad approaches:

• The asset-based methods attempt to determine the value of a business by looking at the value of the hard assets held by the business.
• The market-based methods attempt to determine the value of a business by studying past sales of businesses similar to the subject business, determining sales multiples to apply to the financials of the business (eg. Sales multiple, gross profit multiple, EBITDA multiple).
• The income-based models look at the earnings of the business, and determine a value based on those earnings. The income-based models tend to be most accurate.

The exact method/s to be used will vary according to several factors, including the specific conditions under which the business is being valued (i.e., standard of value), availability of financial and market information, and a host of other factors unique to the valuation engagement.

Absolutely. The impact that an owner brings to the business is referred to as personal goodwill; its value can be determined, and generally, most courts rule that personal goodwill is not divisible.

If you are divorcing, a major component of the valuation of your business has to include an adjustment for personal goodwill; depending on the type of business, it can arguably be a more important piece of information than the value of the business itself.

Under most circumstances (assuming that the fair market value of a business is being determined), the valuation of a minority interest has to include the determination and application of 2 discounts:

• Discount for Lack of Control: a discount applied to the gross value of an interest because of the fact that, under ordinary circumstances, a potential investor is more motivated to purchase a controlling interest in a business than a non-controlling interest.
• Discount for Lack of Marketability: a discount applied in conjunction with a discount for lack of control, that acknowledges the fact that non-controlling interests tend to not be marketable.

Because of the fact that it is a non-controlling interest, the owner will likely experience difficulty selling that interest to a disinterested buyer without the added enticement of a discount for lack of marketability.

These discounts are applied sequentially to the gross value of a minority interest, in order to reveal its fair market value.