{"id":1872,"date":"2024-11-20T10:11:13","date_gmt":"2024-11-20T16:11:13","guid":{"rendered":"https:\/\/adamrichardlaw.com\/?p=1872"},"modified":"2024-11-20T10:12:18","modified_gmt":"2024-11-20T16:12:18","slug":"business-valuation-basics","status":"publish","type":"post","link":"https:\/\/adamrichardlaw.com\/business-valuation-basics\/","title":{"rendered":"Business Valuation Basics"},"content":{"rendered":"\n<p class=\"\">If you are a homeowner, you may have some idea of how much your home is worth.  If you have a retirement account, you likely check the balance regularly.  However, many small business owners do not know the value of their companies. <\/p>\n\n\n\n<p class=\"\">There are certain circumstances in which obtaining a business valuation is very important, for example, when preparing for a sale, planning for a future exit from the business, creating an estate plan, or obtaining investors.<\/p>\n\n\n\n<p class=\"\">A thorough, professional appraisal is important to ensure the valuation’s accuracy.  The method an appraiser uses can be tailored to address your specific business and the reasons why you are seeking a valuation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Value of Valuing Your Business<\/h2>\n\n\n\n<p class=\"\">Many business owners view third-party valuations as overly complicated, expensive, intrusive, and time-consuming.  However, knowing the value of your business is necessary when you are preparing for a sale.  In addition, there are a number of other common reasons for obtaining an independent business valuation:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"\">Exit planning<\/li>\n\n\n\n<li class=\"\">Obtaining financing from a lender<\/li>\n\n\n\n<li class=\"\">Raising capital from investors<\/li>\n\n\n\n<li class=\"\">Insuring the business<\/li>\n\n\n\n<li class=\"\">Implementing an owner buyout agreement<\/li>\n\n\n\n<li class=\"\">Tax, estate, and succession planning<\/li>\n\n\n\n<li class=\"\">Getting divorced and dividing assets<\/li>\n\n\n\n<li class=\"\">Uncovering areas for growth and expansion<\/li>\n<\/ul>\n\n\n\n<p class=\"\">For some businesses, obtaining detailed business valuations at regular intervals can avoid the expenditure of resources in the wrong places and help identify investments with higher growth potential.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Business Valuation Methods<\/h2>\n\n\n\n<p class=\"\">There are several ways to calculate business value.  The three most common approaches to business valuation are asset, income, and market-based approaches.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"\"><strong>Asset-based business valuation: <\/strong>Determining a business’s value using the assets it owns focuses on its book value, which is derived from the balance sheet.  Using this approach, business assets- tangible and intangible- are valued and totaled, while liabilities are deducted.  Determining the value of intangible assets can be tricky, so obtaining a professional appraisal is important.<\/li>\n\n\n\n<li class=\"\"><strong>Income-based business valuation:  <\/strong>Another common method for valuing a business uses its cash flow figures to project future income generation.  Newer businesses and established businesses may use slightly different income-based approaches.<\/li>\n\n\n\n<li class=\"\"><strong>Market-based business valuation:<\/strong>  A market approach to business valuation looks at the purchases and sales of similar local companies.  However, one downside of this method is that it could result in a business being undervalued relative to its assets and earnings.<\/li>\n<\/ul>\n\n\n\n<p class=\"\">A professional appraiser may determine that a combination of these three methods will provide a fairer and more accurate business valuation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Involve a Business Lawyer in Important Transactions<\/h2>\n\n\n\n<p class=\"\">There are many online business valuation calculators that provide instant estimates of how much a company is worth.  However, these simplified formulations are not a substitute for a professional, credentialed appraiser who can apply the most appropriate methodologies for your industry and circumstances. <\/p>\n\n\n\n<p class=\"\">Along with a credentialed business appraiser, a lawyer should be part of your team when you are preparing for important transactions such as a sale of the business.  Learn the value of an experienced M&amp;A business attorney: contact us today to schedule a meeting.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you are a homeowner, you may have some idea of how much your home is worth. If you have a retirement account, you likely check the balance regularly. However, many small business owners do not know the value of their companies. There are certain circumstances in which obtaining a business valuation is very important, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1875,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"Business Valuation Basics - Law Office of Adam Richard PLLC","_seopress_titles_desc":"It's important to understand when and why you will need to have your business value professionally determined.  This article provides you with a basic understanding of business valuation and its importance.","_seopress_robots_index":"","nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[24],"tags":[146,18,31,150,26],"class_list":["post-1872","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-small-business","tag-business-broker","tag-entrepreneur","tag-how-to-buy-a-business","tag-llc","tag-small-business","post-wrapper","thrv_wrapper"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/adamrichardlaw.com\/wp-content\/uploads\/2024\/11\/pexels-linkedin-2182981.jpg?fit=%2C&ssl=1","_links":{"self":[{"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/posts\/1872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/comments?post=1872"}],"version-history":[{"count":3,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/posts\/1872\/revisions"}],"predecessor-version":[{"id":1878,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/posts\/1872\/revisions\/1878"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/media\/1875"}],"wp:attachment":[{"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/media?parent=1872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/categories?post=1872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/adamrichardlaw.com\/wp-json\/wp\/v2\/tags?post=1872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}