There are many circumstances where a formal Business Valuation is required. Business valuations are geographically influenced. A Business Valuation in Houston Texas might create a different value than a similar business in New York. Business Valuations are also known as Business Appraisals. As you might imagine, Business Appraisals are a complicated business. There are different kinds of appraisals for different circumstances.
Here is a summary:
1) Business Appraisal “Calculation of Value”
This valuation is often used in Buying a Business or Selling a business. The premise is that the buyer has no formal ties to the business and the transaction is an arms-length transaction for the sale of 100% of the business. This valuation is generally viewed as a purely financial opinion of market value and makes no assumptions about how a specific buyer might value the business.
2) Estate Plan Valuation
This is a valuation done for business owners who have the business inside their estate and required the appraisal for tax planning issues.
3) Buy/Sell Partner Appraisal
This is often used when one business partner is buying out another business partner.
4) ESOP Appraisal
This is used when the company is installing an ESOP (Employee Stock Ownership Plan) so that the employee-owner has a way to understand the value of their business ownership interests.
5) Divorce Valuation
Self-explanatory and similar in many ways to the Partner buyout valuation listed above.
6) Personal Goodwill Valuation
Sometimes used in a business transaction where an owner is personally involved and critical to the business. For instance, a world renown heart transplant surgeon likely has a lot of personal goodwill built up because people seek out that surgeon INDIVIDUALLY. If that surgeon left the business it’s likely many patients would not contact the business.
7) Minority Interest Valuation
This is a valuation used to assess the value of an interest in a business where the minority ownership is not liquid. For instance, if I own shares of IBM I call my broker and have the shares sold at a published price in 5 minutes. However, if I own 10% of XYZ, INC that is not a publicly traded company with 90% owned by my boss Mary, then I would need to try to find someone to buy my 10%. In this case, since Mary owns 90% of the company and is my boss, my 10% is probably not worth 1/10 of 100% value of the company. This valuation helps determine what your 10% is really worth.
Mr. Elliott is Managing Director of Sunbelt Texas Business Sales & Acquisitions with more than 20 years experience in mergers, acquisitions and business broker. Mr. Elliott purchased Sunbelt Houston in 1996 and has managed the sale of over 500 companies from very small businesses to companies with revenue of more than $30,000,000. Mr. Elliot has provided Business Broker and merger and acquisition adviser services to privately held business in Houston, Austin, San Antonio and throughout Texas.
Over a 20 year career, he has handled a wide range of industries including manufacturing, distribution, medical, machining, construction, and contractors. Mr. Elliott has completed transactions with Private Equity Groups, strategic buyers and a wide range of regional companies executed plans to grow through acquisitions.
Mr. Elliott has been recognized as a “Thought Leader” by Sunbelt Business Brokers Global Network. Mr. Elliott is frequently interviewed in various media and is considered an expert in the field of buying and selling privately held businesses.
Mr. Elliott has received the professional designations of Certified Business Intermediary (CBI) and Master Merger & Acquisitions Intermediary (MMAI).