We perform valuations 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.
Our analysts, valuators and appraisers at George & Company regularly attend continuing education on the proper standards and procedures for business valuations and appraisals.
Our Business Valuation & Appraisal Services
Different situations call for different types of business valuation and business appraisal services. Below is a brief overview of the valuation and appraisal services offered by George & Company and the descriptions of the valuation engagement reports provided. If you are unsure which type of report you will need, we can help you find the best option for your situation.
Opinion of Value (most probable selling price) is a formal report primarily used by buyers, sellers, and business brokers to determine reasonable selling and/or listing prices for businesses considered as middle to upper main street.
Limited Summary Valuation Report is a formal report primarily used in non-litigation situations. This restricted-use abbreviated report is typically all that is needed for determining the selling price of a business or assisting in establishing a buy-sell agreement between partners and/or shareholders. This level report follows the standards set forth by the Institute of Business Appraisers (IBA) and National Association of Certified Valuators and Analysts (NACVA).
Detailed Summary Valuation Report is a formal report that is compliant with the standards of the Institute of Business Appraisers (IBA) and National Association of Certified Valuators and Analysts (NACVA). This report is suitable for litigation support.
Business Valuation Components
Ongoing businesses or "Going Concerns", as they are officially termed, contain both tangible and intangible value including such intangible assets as: accounts receivable, branding, contracts receivable, customer deposits, customer lists, key employees, patents, recipes, special knowledge, trademarks, unique company name & reputation, and goodwill in general as well as other intangible assets in addition to the tangible value of the business’s physical assets.
Typically, business valuations include both tangible and intangible assets that require a value. Additionally, regarding Going Concerns, the value of their intangible assets (generally speaking) far outweighs the value of their tangible assets unless the business is insolvent, bordering on insolvency or is a holding company. In contrast, physical or tangible assets such as equipment, fixtures, furniture, jewelry, real estate, and other physical assets are appraised rather than valued.
When it comes to valuing businesses, there are occasions when tangible assets of the business (machinery and other equipment), may need to be appraised as part of a business valuation. Additionally, such tangible assets may need to be appraised for compliance with bank SBA regulations and for other purposes such as acquisitions, bankruptcy, divorce, partnership dissolutions, etc. when there is no intangible value or goodwill in a business or when there is no business at all.
Commonly Used Methods of Valuation
The asset approach is defined in the International Glossary of Business Valuation Terms as "a general way of determining a value indication of a business, business ownership interest, or security using one or more methods based on the value of the assets net of liabilities." Any asset-based approach involves an analysis of the economic worth of a company's assets more than its outstanding liabilities. Thus, this approach addresses the book value of the Company as stipulated in Revenue Ruling 59-60.
Revenue Ruling 59-60 clearly requires that an income approach be used when it lists "the earning capacity of the company," as a factor to be considered. The income approach is defined in the International Glossary of Business Valuation Terms as, "A general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that convert anticipated economic benefits into a present single amount." This method is the most utilized method by analysts for "Going Concerns".
The idea behind the "Market Approach" is that the value of a business can be determined by reference to reasonably comparable guideline companies ("Comps") for which transaction values are known. The values may be known because these companies are publicly traded or because they were recently sold, and the terms of the transaction were disclosed. For a business valuation professional, a good set of comps may be as few as two or three – and sometimes no comparable company data can be found. The objective of analyzing these comparable sold companies is to determine if the comparable company has a similar risk profile to the subject company. There are three sources of comparable company transaction data: Public Company Transactions, Private Company Transactions and Prior Transactions of the Subject Company.