Why a Business Valuation is Important
At some point every business owner needs an accurate, thorough valuation or appraisal. A professional business valuation prepared specifically for your company should be objective and focus on the unique attributes of your business.
As a business owner, you may be thinking about an acquisition, the sale of your business, your exit strategy or succession planning. A professional business valuation should be an important tool for business owners to analyze and plan their business’s financial strategy throughout the lifetime of their company. And it’s smart to leverage this tool before making major decisions so that you’re operating in a truly transparent way that doesn’t lead to any unpleasant surprises.
There is no single time that a valuation should be done. You should always have a pulse on the value of your business, so you are prepared for any number of events, the most common of which is when you are planning to sell. However, selling is not the only event that warrants a business valuation. You should consider having a professional valuation done for your business for any of the following events:
- The Sale or Acquisition of a Business
- Partnership Agreements or Disputes
- “C” Corp. to “S” Corp. Conversions
- Litigation or Insurance Claims
- Valuing Intellectual Property (IP)
- Employee Stock Option Plans (ESOPs)
- Business Liquidation
- Prenuptial Agreements
- Estate Planning
- Exit Strategy Planning
- Divorce Proceedings
- Loans/Financing
- Gift and Estate Taxes
What is a business valuation?
A business valuation or appraisal is the independent and unbiased process of determining a supportable opinion of the value of a business, business ownership interest, security or intangible asset as of a specified date.
How Can Murphy Business Help?
Murphy Business Sales-Irvine excels at providing business owners properly prepared business valuations, regardless of need. All Murphy Valuation Service valuations are performed by qualified, professional appraisers experienced in all aspects of business valuation and business transfers.
The valuations are performed in compliance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP) as well as the Business Appraisal Standards of the Institute of Business Appraisers. Compliance with industry standards ensures that proven peer-reviewed valuation methods are used to develop defendable opinions of value.
What’s Your Business Worth?
All Murphy valuations are performed by qualified, professional appraisers experienced in all aspects of business valuations and the business transfer process. Our valuations are performed in compliance with Uniform Standards of Professional Appraisal Practice (USAP), as well as the Business Appraisal Standards of the Institute of Business Appraisers. Adhering to these standards ensure that proven, peer-reviewed valuation methods are used to develop defendable opinions of value.
What Type of Business Valuation is Right for You?
Broker’s Opinion of Value (BOV)
A Broker’s Opinion of Value (BOV) Report is ideal for small businesses to determine a Fair Market Value (FMV) for a business with annual revenues up to approximately $1,000,000 and can help a business owner determine a reasonable asking price for the business when ready to sell. This valuation is prepared in-house by your local business broker.
Calculation of Value Report (COV)
The Calculation of Value (COV) Report is a reasonably priced option for companies where the BOV report is inappropriate. The COV is appropriate for setting listing prices, for preliminary estimates of value for estate planning, for settlement or mediation purposes or as negotiation support for an acquisition or sale of a business.
It is used when the client and appraiser agree to specific valuation approaches, methods, and the extent of selected procedures with minimal if any research into information the client likely already knows, such as the history and nature of the subject business, industry trends and outlook, the economic outlook, etc.
The Calculation of Value Report 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).
Machinery & Equipment Appraisals (MEA)
A machinery and/or equipment appraisal is the independent and unbiased process of determining the supportable opinion of value of tangible assets as of a specific date. Appraisals can be performed for a variety of value premises from fair market value in place and in use, to forced liquidation value.
All Murphy Machinery & Equipment (M&E) appraisals are performed by certified professional appraisers experienced in all aspects of machinery/equipment brokerage as well as the science and art of machinery & equipment appraisals. All appraisals are performed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation. Compliance with industry standards ensures that proven peer-reviewed appraisal methods are used to develop defendable opinions of value.
We also perform Machinery & Equipment appraisals for bank “special assets” purposes as well as inventory valuations/verifications for lending/collateral or business transfer purposes.
Business Valuation Report (BVR)
The business valuation report is referred to as a restricted-use appraisal report. It is restricted to use by the client and provides the appraiser’s opinion of the value of the subject company based upon the standard of value known as “Fair Market Value”.
The most probable price which a property should bring in a competitive market under all condition’s requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of the title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated,
- Both parties are well informed or well advised, and acting in what they consider their best interests,
- A reasonable time is allowed for exposure in the open market,
- Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto,
- The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
The primary purpose of the report is to determine the value of the subject (excluding real estate, if any) in preparation for its sale/acquisition. As a restricted use report, this document is intended for the client’s use only. A third party may not properly interpret this report without access to information in the appraiser’s work file.
This report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation for a restricted-use appraisal report. In order to provide the client with a cost- effective appraisal report, portions of the report that the client would be totally familiar with are eliminated. For example, areas that are researched but not documented in detail in the report include: the history of the company, the local and national economy, industry forecasts, a comparison of the subject with industry and a step-by-step display of all formulas and calculations.
Business Appraisal Report (BAR)
This comprehensive report provides an opinion of value of the subject company based upon the standard of value known as the “Fair Market Value” as described below:
The most probable price which a property should bring in a competitive market under all condition’s requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of the title from seller to buyer under conditions whereby:
- Buyer and seller are typically motivated,
- Both parties are well informed or well advised, and acting in what they consider their best interests,
- A reasonable time is allowed for exposure in the open market,
- Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto,
- The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
This report can be used for any purpose including valuing the subject (excluding real estate) in preparation for its sale or acquisition and is not restricted to client use and can be used as a marketing tool if the subject is being sold. This report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation for an appraisal report.
