Business Valuation Services
Have you ever heard of a business valuation? If so, have you ever received one? Business valuations are a vital part of maintaining your business plan and planning for the long term.
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The most common reasons to get a business valuation are when the company owners are considering selling the business or merging with another company. The results can also be used as leverage when trying to attract investors or when you are ready to exit the business and pass ownership along to another partner or family member.
The business’s value may also be used in carrying out divorce proceedings, settling estates, and protecting partner interests in ownership buyouts.
In addition, business valuations are also an important tool for tax purposes. The IRS requires that businesses be based on fair market value. Tax-related events, such as selling stock or gifting shares to employees, will be taxed based on the business’s value.
Market capitalization is considered one of the simplest methods to value a business. You can calculate this value yourself by multiplying your company’s stock share price by its total number of shares outstanding. For example, if your stock is valued at $100 and you have one million shares outstanding, then you could value your company at $100,000,000 ($100 x 1,000,000).
Your company’s profits are a stronger indicator of your company’s value compared to its sales revenue, which makes the earnings multiplier a reliable method. It works by adjusting the current price-to-earnings ratio to account for current interest rates.
The Times Revenue method values your revenue streams generated over a specific period of time and adds a multiplier to it. This multiple is determined by your industry and the general economic environment.
This asset-based valuation method reviews the operational-related assets of a business and assigns a value based on what it would cost to replace them.
Complex companies with multiple business units or segments may benefit from a Breakup Value Method. This method examines what each individual segments may be worth if they were separated from the parent company.
The Discounted Cash Flow method looks to the future to predict cash flow value. The goal of a DCF analysis is to predict how much an investment is worth today based on predictions of how much revenue the business will generate in the future.
At WestPac, we use the latest technology and a seven-step process to determine the value of your business, including a thorough examination of the following:
It’s important to understand what your business has done and how it has performed in the past. However, business worth is largely based on what the business will be able to do in the future.
Book value refers to the shareholders’ equity in the business. This is calculated by subtracting the company’s total liabilities from its total assets.
Liquidation value is the amount the company would receive if it were to liquidate all of its assets and pay off all liabilities.
Have questions about your business valuation? Review these answers to some of our most frequently asked questions for more insight.
A business valuation is a process that determines the overall economic value of a business or corporation. Business valuations span many use cases, including determining a fair market value for the sale of the business, taxes, divorce settlements, and establishing joint ownership. This process is conducted by professional business evaluators who review the business’s history and potential in detail and deliver an objective estimate.
Business valuations are intricate processes that involve many moving parts. Many business valuations begin by looking at the company’s balance sheet, but it doesn’t end there. Business valuation experts will estimate the cost of a business’s assets, equipment, and inventory, review its debts and liabilities, and project its revenue and earnings. The process also uses earnings multipliers to calculate the price-to-earnings (P/E) ratio that estimates the company’s earnings over the next several years.
Professional business valuations can vary in cost since no two are quite alike. The industry “average” ranges from $3,000 up to $30,000 or more. The actual cost will depend on the complexity, industry, location, and time. With a few key details, your business valuation experts can provide an estimated cost upfront. WestPac offers this service; if you are interested in learning more about it, simply contact us below!
Business valuations can be useful tools in a number of scenarios. For example, if you are considering selling your company, a business valuation can support your asking price or help you determine how much to sell for. You can also use your business valuation results to find new opportunities and costs as you plan for growth (and an eventual transition).
Your business’s value is a range, not an exact figure. Therefore, it’s possible for your business to have multiple “values” at once. Values can change depending on how you plan to exit your business (e.g., liquidation may hold a lower value compared to transitioning control to a shareholder or a portfolio buyer). Your business valuation team can provide further insight on this range of value.
CPAs are well-versed in business valuations, as they can compare your business’s assets vs debts and liabilities and give you a firm dollar value. However, they are not always the best resource when it comes to getting a thorough business valuation. Combining their experience with a professional business valuation specialist gives you a clearer picture of what your business might be worth.
Still have questions? Contact our team and let’s discuss!
Our teams of financial advisors and wealth managers assist our clients with managing finances in every aspect of their lives. We help each client shape their vision for the future and take the right steps today that will help them grow and protect their wealth over time and achieve long-term financial goals. To do this, we combine a methodical approach with a customized strategy that caters to each client’s unique needs to encourage confident decisions and generate financial stability.
To date, we have administered more than $1.8 billion in assets for more than 31,000 clients, including individuals, couples, and business owners.
Contact our team below to start a conversation. We offer business valuations as part of our client planning and review process.
As a business owner, you spend a lot of time working IN your business, but how much time do you spend working ON your business? With potentially hundreds of thousands of man hours IN your company, shouldn’t you spend a little more time ON your business to protect and position it to give you the greatest reward? But where do you start?
A business valuation is the first step for you, as a business owner, to successfully plan, grow, and exit your business.
How will a business valuation benefit you?
Business valuations can help identify growth opportunities, secure and lower bank loans, retain and protect key employees, simplify mergers, expedite dissolutions, and clarify plans and procedures to help maximize what is available to the people you care about the most: you, your family and the people you employ.
Wondering where to start? Start with a business valuation so that you can take your business where you want it to go.