What is the importance of a third-party business valuation?
An independent, professional business valuation will eliminate hunches and guesswork, allowing a business owner to know what their business is truly worth. It will identify tangible and intangible value of a business to inform existing business owners, potential buyers, investors, lenders, and other related parties. Without a professional business valuation, a company’s value is derived from heavily biased opinions and is not respected or recognized during significant financial engagements.
Is there a difference between “book value” and “fair market value”?
Yes! There is a significant difference between “book value” and “fair market value”.
“Book value” is an accounting view of the business. This perspective reduces the values of items owned by a business for tax purposes. As a result, “book value” does not provide an accurate economic perspective of the entire business and its operation.
“Fair Market Value” identifies the true economic value of a business, its assets and their income generating capacities. There are many techniques involved in calculating the “fair market value” of a business to ensure accuracy and fairness. Consequently, this perspective is what a willing buyer and willing seller would agree to when a business is sold.
Why can’t my Accountant appraise my business?
The majority of Accountants are not focused, experienced or fully-capable of conducting a high-quality, cost effective business valuation. Most have a limited knowledge base in conducting market research, assessing market comparables, and understanding the dynamics at play in buy-sell transactions.
In contrast, there are Accounting firms that have a specialization in business valuations but those are typically geared towards very complex events such as tax issues, litigation, etc. These types of valuations typically well exceed tens of thousands of euros.
How much does a business valuation cost?
Business valuation prices can vary dramatically from firm to firm. This is due to a provider’s areas of expertise, available resources, geographic restrictions, infrastructure, etc. Traditionally, professional business valuations will cost anywhere from €15,000 to €30,000+ based upon complexity.
Best Practice Consulting engagement fees will cost you anywhere from €7,000 to €15,000+ based upon complexity.
How often should I have a business valuation conducted?
This is really dependent on the purpose of the valuation. We specialize in assisting small to middle-market sized businesses truly understand their market value in order to sell, buy or strategically grow their company. As economic conditions change it is prudent to continue to understand the value of your business.