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Business Valuation

Gavrilov & Company Brings You a First Class Business Valuation Service

Most Americans are familiar with the business term “valuation” from the popular television show, “Shark Tank.”  And generally, in that context, we see it used as a bargaining chip among the millionaires to achieve lion’s share of the equity in an entrepreneur’s business. And the millionaire-sharks generally scold the entrepreneurs for their business valuations when they make their pitches on the show.

Avoid the Sharks by Knowing What Your Business is Really Worth

Actually, the presenters deserve the chastisement because they often far overestimate their valuations. And that is to say they, they think their companies are worth more than they are.

Upholding the Highest Standards in our Business Evaluations

But we assure you there are professional ways to create business valuations. And Gavrilov & Co knows you deserve a first class, detailed, impartial and independent business valuation.

  • We will consider a several income, market and asset approaches before beginning an assessment.
  • Only then can we choose methods of valuation that are best suited to your company.
  • Likewise we will analyze your objective for the valuation so that our data reflects your purpose.
  • We hold to the highest standards of objectivity and ethics in our efforts to create independent and justifiable value opinions. And we pride ourselves on our adherence to the National Association of Certified Valuation Analysts (NACVA) standards.
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Gavrilov & Co with Help You Can Meet Many Business Objectives with Proper Valuation

Briefly stated, valuation is a formal response to the question, “What is your business worth?”

According to the Business Dictionary, a valuation is a “process of examining various economic factors of a business using predetermined formulas to assess the value of the business or an owner’s interest in a company.”

  1. You might need a business valuation order to provide an accurate picture of your company’s financial standing. And such a valuation would be crucial to any presentation you gave current or potential investors.
  2. The Internal Revenue Service requires that a business be valued based on fair market value.
  3. Naturally we understand the major reason most clients order a valuation is to get their business ready for selling.
  4. Likewise you should know your company’s value

If you are creating any type of succession or estate plan.

  • Let’s say you want to transfer the ownership of your business with gifts of shares. In that case, our independent valuation assures that the gifts maintain their value under the scrutiny of the IRS examination.
  • In a similar fashion, our valuation will assure you about the adequacy of your life insurance coverage.
  • Likewise, we feel you must have a good, up-to-date valuation in order to plan an exit strategy for shareholder retirement.
  • Last but not least, our meticulous valuation will help when filing an estate tax return for an owner’s estate. Likewise the valuation will fulfil any related tax liability.

We Dig Deeper:  More Business-Related Reasons You Might Need a Valuation Process

Several other business-related reasons exist for a valuation process and we group them under generally under the heading Business-related reasons. Such reasons exist any time you must create buy-sell terms for buying back owner shares.

Examples of events that generate buy-sell agreements include:

  • In the case of divorce proceedings and legal division of assets, both parties need a valuation.
  • Likewise, a valuation could help a business owner in any type of litigation such as an economic damages claim, a bankruptcy or a shareholder dispute.
  • Sometimes a valuator will help the business owner settle out of court. Valuators have even served as an expert witnesses during trial.
  • Upon shareholder retirements or disputes,
  • When a shareholder becomes disabled or dies.
  • After a merger or acquisition, Financial Accounting Standards Board might mandate a valuation. A specific example of this would be the creation of an employee stock ownership plan (ESOP). Again, the IRS and the Department of Labor will need a value basis for company stock.
  • It’s important to note that if you change your business structure, as many business have done recently in 2018-2019, a valuation will create a value basis for company stock.
  • Sometimes a valuation process is the only way to straighten post-deal tax problems.

We don’t pretend these are all the reasons you might seek a business valuation, but they are some of the main ones within our experience.

Four First Class Methods of a Business Valuation

No matter what your objective in attaining a valuation happens to be, we want you to know there are 4 main valuation methods. Choose the most appropriate option for a business valuation of your company. (We want you to also know that every single valuation we do is customized and individualized to the needs of your company.)

Special Note:  Publicly Traded Companies vs. Privately Held Businesses

As you might guess, we can assess the value of a publicly traded company by simply checking the closing stock price at end of day.  However, assessing the value of a privately held business is considerably more complex.

We will begin with your financial statements.  However, they could never create a complete picture of your company’s worth. We must tell you that valuation methods are not simplistic.

Our Process

On the one hand you need us to value material assets. Here we will evaluate inventories and equipment. On the other hand we must calculate your immaterial assets.  An example of such abstract assets would be your name brand recognition or stellar employees.

Therefore, We Present the Four Typical Methods:

  1. The Asset or Cost Method

In this method, we state the company’s assets and liabilities. And we match them with fair market values replacing book values.

We use this method especially for manufacturers, distributors and businesses that maintain many hard assets. You will most benefit from a valuation that stresses factors like inventory and receivables. Plus, we’ll emphasize those fine improvements you made to your facility. And yes, we must adjust for depreciation and any bad debts you encountered.

  1. The Income Method

Using this the Income Method, we zone in on the benefits of investment in your business.  We determine the rate of return versus the risks of investing in your business.

This method offers you a unique formula:  We can estimate your business value by dividing its anticipated earnings by a capitalization rate.

As you might guess if you are a start-up or a company with short-term earnings expectations, this might not be the method for your valuation. You probably need a discounted cash flow analyses.

  1. The Market approach:

For this method, we will use pricing multiples based on:

A.) Researched stock prices of comparable public companies, or

B.) Asset or stock sales of comparable private companies.

We find these multiples in proprietary databases. When we select comparable companies, you will appreciate our use of a variety of criteria. We will look at the size of your company, the condition of the industry as a whole.  And we look at your company’s transaction data and overall financial condition.

  1. The Industry Rule of Thumb Method:
    It won’t surprise you to know that Industry pricing formulas help us as checks and balances for our data. Sometimes you hear these formulas at trade conventions or read them in the trade periodicals, online and hard-copy.

However the Rule of Thumb method is never a primary or sole method for a Gavrilov & Co Valuation.  

This method is often full of vague generalities and simplified definitions. The rule-of-thumb sometimes omits such critical factors as working capital, up-and-down earning histories or unexpected fluxes in market conditions. This is probably the very method that tripped up those unlucky Shark Tank entrepreneurs who failed in their presentations.  They did not understand their worth.

We Offer You Professional Business Valuation with Business Valuators Who have Both Financial Expertise and a Background of Knowledge in Your Specific Industry.

  • Understanding your business value is a key factor in planning your strategic decisions about your company. Ask us how…
  • Through our valuation process, you can find solutions to the problems of today and anticipate the problems of tomorrow before they occur. We can show you examples…
  • In the Present: Our business valuation will help you show your ongoing value to your clients and investors. And our reports help you avoid being underinsured.
  • In the Future: Our business valuation helps you prepare for a lucrative sale of your company with complete and ethical transparency. And over 7.7 million companies will make the decision to change hands within the next 10 years.