Business Valuation & Appraisal

What percentage should I give an investor who wants to fund my company? How is my business going to be divided in a divorce? How much will my bank lend me for my business? How much should I sell my business for?

A Business Valuation, or appraisal, can help you answer these questions and give you the ability to make an informed decision about your future plans.

These questions are routinely asked as a part of starting up or exiting your business, selling your business or buying someone else’s, passing your business to your children, separating from either your spouse or your business partner, or in the middle of a lawsuit.

The Morrison Firm follows a systematic approach to valuations which includes a comprehensive review and analysis of relevant information and industry data, and face-to-face interviews with key individuals. We strive to go beyond your current needs and can also offer specific strategies and methods to legally increase and decrease value where desired.

We have the experience necessary to provide a professional, efficient, informative and realistic appraisal of your business. All of our business valuations meet IRS standards and are performed by a qualified expert.

Business Valuation Services Include:

Tax Planning

Buying / Selling Business

Buy / Sell Agreements

Litigation

Audit Opinions – FV 141 & 142

Business Valuation & Appraisal FAQs

What valuation / appraisal methods can be used to value a business?

There are three approaches to valuing a business, Asset, Market, and Income. The Asset method is based on the value of assets of the company. The Market method utilizes sales data from other similar companies. The Income method utilizes a form of earnings either on a discounted cash flow or capitalization of earnings. A complete business valuation or appraisal takes all three into consideration even if only one is used.

How do you determine Cash Flow, how is it different from income?

Simply put, Cash Flow is the sum of the inflows and outflows of cash during a period. Cash flow is divided into three categories: operating, investing, and financing. It is different from income in several ways.

What is Fair Market Value?

Fair Market Value is defined by the NACVA as “The price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”

What is Discounted Cash Flow and why would you use it?

Discounted Cash Flow is a method of looking at a stream of net income or cash and valuing it in today’s dollars. The premise being that income received becomes less valuable the further into the future it is paid. The income stream can take many forms such as a regular monthly payment or a onetime payment at one point in the future or anything in between. A discounting factor is used similar an interest rate, which varies on the timing and perceived risk of the income stream.

How can I tell what my business is worth? I am getting divorced. How can I tell how much my spouse’s business is worth?

The best way is to engage a valuation / appraisal expert to make sure expectations are correct and no money is left on the table.

What levels of valuation / appraisal service does The Morrison Firm offer?

TMF offers three levels of business valuation / appraisal service:

Valuation consultations are comprised of gathering pertinent information for review and analysis by the valuation / appraisal expert. Then discussing the needs and concerns of the client as well as considerations of value for the matter at hand.

A Calculation engagement involves gathering information and analysis by the valuation expert. It may also involve consultations and discussions. The resulting value is calculated utilizing one valuation method and is expressed as a value or range of values.

A Valuation engagement is an extensive and in depth study of the business, industry, economy, and other factors that takes all three valuation methods into account. It results in a determination of value expressed in a full report. It is the only method of valuation suitable for admission to court proceedings or filings with the IRS.

Can anyone value a business? What certifications or expertise are required to value a business?

Only those who have the appropriate certifications and expertise can value a business in the context of submitting expert testimony in a court of law or for filings with the Internal Revenue Service. Since 1991, The National Association of Certified Valuators and Analysts (NACVA) has been at the forefront of the valuation / appraisal industry. They have trained and certified experts through developing a rigorous 45 hour course, extensive testing, and peer reviewed test case valuations. In addition, they require 40 hours per year of continuing education.

What do small business owners need to do to prepare for a sale of their business?

Successfully selling a business takes planning and the right team. The team should at a minimum consist of a CPA who is also a certified valuation / appraisal specialist and an attorney. The owner will need to ensure the business is running at peak performance and be able to answer questions and interact with potential buyers and their due diligence teams. For this they need a team of their own to get information in order, anticipate buyer needs, and interact with buyers. Having good systems in place and quality information makes all the difference when attracting a buyer and their lender.

Who will finance the purchase and sale of a business?

Financing for a business comes from one or more of three potential sources: the buyer, the seller and/or a lender. The financing arrangements can be just as crucial as the price point of the sale.

What steps should I take to buy a business?

Once you have identified a business to buy it is important to engage a CPA who is also a certified valuation / appraisal specialist and an attorney to perform due diligence and protect your interests. There are many things to consider when buying a business and the right experts will serve to protect your interests.

Should I buy a business entity or just the assets?

This is an important question in any business purchase transaction. The seller is generally inclined to sell the entity and the buyer generally seeks to buy the assets. There are many reasons for these preferences including tax and liability ramifications for both parties.

How can you predict future earnings of a business?

Most commonly future earnings of a business are predicted using historical outcomes. More recent periods usually provide more insight than older periods. Each situation is unique and factors both internal and external to the business must be considered for predictions to be of value.

Professional Consultation

A professional consultation is a powerful tool we use to learn about you and your business to ensure we are a good fit. Contact our office to schedule an appointment with one of our experts and see how we can assist you in achieving your business objectives.

Client Reviews

★★★★★ 5/5

Amy M. ★★★★★
We engage the Morrison firm as our fractional controller. Josh and the team has been amazing. He treats us like we are his priority everyday!

Theresa A. ★★★★★
I have known John Morrison for years through work and he is the most pleasant man to deal with on anything. Any questions we might have he is there to give you the answers or gets back with you in a timely manner.
Now with that being said, … More I absolutely adore Angela Sutton. She and I work so well together. She is professional and also very funny and witty at the same time! Love our conversations!
I give The Morrison Group 5 Stars!