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About Business Valuation
A note from Tom Murtha, our Senior Valuation Analyst
Why do we Need Business Valuations?
Some semblance of a business valuation is necessary to negotiate a purchase, sale, or merger of a business enterprise. Business valuation is also a requirement when determining value for exit planning purposes, splitting up family assets in a divorce, or calculating estate tax upon death. Performing a business valuation requires knowledge, resources, databases, and tools that are costly and unavailable to the general public. For this reason, business owners, attorneys, and CPAs require the services of business valuation and M&A firms such as Murtha & Murtha.
It’s been said that the primary reason one starts a business is to one day sell the business. All businesses generate value, but it is not easy to determine what that value is. Knowing the value of your business is key to planning strategic activities. A business valuation will help you better understand your business, its profit centers, and its strengths and weaknesses. A business valuation will provide you with key information to help you make decisions in every aspect of your business.
Utility in Exit Planning
A strong business plan and exit strategy will often require a valuation of your business and periodic updates to ensure that management is on track in achieving the main goals of business ownership. These goals are to maximize enterprise value for the eventual transfer of the business to another party or generation. Buy-sell agreements and shareholder/member agreements often have this requirement hidden in the document.
A well written business valuation report will assist in marketing your business, as it will “tell the story” of the business and reveal the drivers that affect the value of your business. This valuation is the capstone element of any effective offering memorandum (an offering memorandum is the primary marketing package that M&A firms assemble in order to generate interest from investors).
What to Expect from your Valuation Advisor
A valuation professional should be able to demonstrate through education, training, and experience this he or she has the knowledge and level of competency required in valuing business enterprises. Of the utmost importance is one’s affiliation with a recognized valuation organization such as the National Association of Certified Valuation Analysts (NACVA). Members of NACVA are required to adhere to industry standards in performing valuation services and communicating their conclusions of value. Standards are intended to assure users the services they receive meet an industry-acceptable level of due care, including the thoroughness of the analysis and communicating the results.
About Our Valuation Analysts
Our analysts have been engaged in business valuation and appraisal for decades and have earned rigorous credentials. We have performed valuations for hundreds of companies in dozens of industries for a multitude of purposes. Contact us today to discuss how we can assist you in determining the value of your business.