Business Valuation Methods: Income Approach and DCF Model – Company Valuation Expert in St. Louis, Chicago

Business Valuation Methods: Income Approach and DCF Model – Company Valuation Expert in St. Louis, Chicago

One of the approaches business valuation companies will consider when providing a valuation of a company is the Income approach.

The income approach considers historical income, future revenues of a company, the earning potential and also capital requirements, or how much will be needed to invest in the building and equipment to support future revenue growth.

There are a couple of ways to look at the potential income of a company. One business valuation method which falls under the Income approach is the discounted net cash flow or DCF method. This method involves projecting the revenues, cost of goods sold, operating expenses, depreciation, working capital and taxes for five to ten years into the future.

The next step is to discount this future revenue stream to the present, which most of you will recognize as a present value calculation. The discount rate is derived from several methods such as the build up model or CAPM for example. The business valuation expert will also have to take into consideration whether this is a control or minority interest and make an adjustment with a control premium or a discount for lack of control. These are business valuation terms…which we discuss in more detail in other videos.

There can also be situations where there are liquidity or marketability issues for stock in closely held businesses. There are discounts for lack of marketability to cover these issues.  As you can see there are many steps to consider when valuing a company from the income approach, but at least now you know enough to be dangerous.

If you would like more information on business valuations, methods to value a company or how to find reputable business valuation companies in Chicago, New York or St. Louis check out our website at http://www.ValuationStLouis.com or you can find additional videos on company valuation issues at http://www.YouTube.com/businessvaluationSTL

Business Valuation Methods: Income Approach and DCF Model – Company Valuation Experts in St. Louis, Chicago

Business Valuation Methods — Income Approach and Discounted Cash Flow or DCF Model. We are company valuation experts in St. Louis, MO. One of the approaches business valuation companies will consider when providing a valuation of a company is the Income approach.

The income approach considers historical income, future revenues of a company, the earning potential and also capital requirements, or how much will be needed to invest in the building and equipment to support future revenue growth.

There are a couple of ways to look at the potential income of a company. One business valuation method which falls under the Income approach is the discounted net cash flow or DCF method. This method involves projecting the revenues, cost of goods sold, operating expenses, depreciation, working capital and taxes for five to ten years into the future.

The next step is to discount this future revenue stream to the present, which most of you will recognize as a present value calculation. The discount rate is derived from several methods such as the build up model or CAPM for example. The business valuation expert will also have to take into consideration whether this is a control or minority interest and make an adjustment with a control premium or a discount for lack of control. These are business valuation terms…which we discuss in more detail in other videos.

There can also be situations where there are liquidity or marketability issues for stock in closely held businesses. There are discounts for lack of marketability to cover these issues. As you can see there are many steps to consider when valuing a company from the income approach, but at least now you know enough to be dangerous.

If you would like more information on business valuations, methods to value a company or how to find reputable business valuation companies in Chicago, New York or St. Louis check out our website at http://www.ValuationStLouis.com or you can find additional videos on company valuation issues at http://www.YouTube.com/businessvaluationSTL

 

Getting Divorced? Do You Need to Hire a Divorce Valuation Expert? Kansas City, Chicago, St. Louis

Many people have questions about whether they need a business valuation expert when they’re getting divorced. Most family law cases involve fees for attorneys and experts, and people are always trying to save money — I completely understand.

The thing is…If there is ownership of a small business, shares of a family held business, marketable securities, or if real estate properties owned by both parties, then you probably need an expert to place a value on those assets. You may need a valuation company or real estate appraisal service.

You see, when you go into court and your husband or wife has hired an expert and their expert says that the business and assets are worth millions of dollars or possibly nothing — zero, nada…then you will want to hire an expert who will provide a reasonable value for the same assets. You see, there are company valuation experts out there who will testify to any value — or a value which is beneficial to the client and attorney.

The reality is that the business expert is the servant of the court, judge or jury and the judicial system as a whole– and you will want to find someone who will give an opinion of value that is reasonable and will stand up in court, not just someone who will claim any number.

That being said — if your spouse has an expert who has an opinion of value and you do NOT have an expert who provides another perspective on the value — then the judge is only left with ONE option. Sometimes saving money, but losing all of your assets is not the best route to take in divorce court.

If you own a business in St. Louis and would like to learn more about business valuations for divorce, how to value a company, or how to find a qualified company valuation expert in Kansas City, Chicago or St. Louis, visit our website at http://www.valuationstLouis.com or check out our additional videos at http://www.YouTube.com/businessvaluationstl

Valuation Expert: What Happens After the Company Valuation Expert is Hired?

http://www.ValuationStLouis.com (314) 541-8163 Valuation Expert and Valuation Process – What Happens After the Company Valuation Expert is Hired? What are the steps in the company valuation process and how can the small business owner can be prepared?

Small business owners always have questions about the valuation process. What happens after I hire a company valuation expert?

First the expert is going to give you a list of company information which you need to compile in hard copy or electronic format. Documents such as historical financials, income and expense projections, operating agreements, buy-sell agreements, prior sales transactions within the company, lease agreements are all examples of what the expert will need for the valuation engagment.

One of the first steps for the expert is to review three to five years of historical financial data. This could be income statement and balance sheets audited or reviewed by an accounting firm or CPA, or if you don’t have an accountant then you can supply the expert with tax returns for the company.

The business valuation expert will also want to review your projections for income and expenses. The company valuation expert will meet with you for a couple hours and discuss all facets of your business, including industry and economic issues pertaining to your company.

The expert will develop a report or calculations depending on your specific situation which should take anywhere from 2-6 weeks. It will take time to gather all the pertinent documents for the valuation, so the faster you can get the documents to the expert, the faster they can get going on the work.

If you own a business in St. Louis and would like to learn more about business valuations, how to value a company,  or how to find a qualified company valuation expert in Chicago, New York or St. Louis, visit our website at http://www.valuationstLouis.com or check out our additional videos at http://www.YouTube.com/businessvaluationstl

Valuation Expert: Do You Need a LOCAL Business Valuation Expert? St. Louis, Chicago, Kansas City

Valuation Expert St. Louis: Do You Need a LOCAL Business Valuation Expert? Chicago, Kansas City

If you are looking for a valuation expert, find one you trust with credentials and experience – no matter where they are located. I speak with business owners across the country everyday about valuation issues. Most of the time they are calling from other parts of the country to get a referral for a valuation expert in their area. The question is “do you need a company valuation expert in the area you operate business or not?”

Well, the reality is that you do NOT need a valuation expert in your city. You need an expert who has the credentials to value a closely held company, the experience and better yet — and expert who has defended their work in court or submitted reports to the IRS.

Let’s talk about credentials — you know all those letters behind someone’s name. There are several valuation credentials a person could have such as an AVA or CVA from NACVA, National Association of Certified Valuation Analysts, ASA in business valuation, from the American Society of Appraisers or ABV, accredited in business valuation, which you can attain from the AICPA if you also have a CPA. No credential is better than the other one — really, but you want to make sure the expert has a valuation credential.

Next you want to make sure they have experience. It doesn’t necessarily have to be in your specific field or business industry, but they should have experience in valuing businesses in general. Also, ask the expert if they have ever had to testify in court about their valuations or submit their reports to the IRS — why is this important?

Well, when you testify in court, you need to stay current with valuation methodology and changes in the valuation industry. Same with submitting the reports to the IRS. You need to be able to defend your approach and valuation methods, which makes you really have to know what you are doing.

Now if you find someone who you know has the valuation credentials, experience in valuing business and also has defended their work in court, you might have a great expert. And if this expert is not in your city — they are usually only a quick flight away.

Most valuation work can be accomplished over the phone and through the internet. Work with someone you trust who can work within your budget, don’t worry about where their physical office is located.

If you own a business or real estate assets and would like to learn more about business valuations, how to gift shares of your company, or how to find a qualified business valuation expert in Chicago, Kansas City or St. Louis, visit our website at http://www.ValuationStLouis.com (314) 541-8163 or check out our additional videos at http://www.YouTube.com/businessvaluationstl

Business Valuation Services St. Louis: Asking About Industry Experience and Credentials – Valuation Reports St. Louis

Asking About Industry Experience and Credentials- Does the valuation expert need experience in a specific industry in order to provide valuation services? Business Valuation Services St. Louis

Small business owners always have questions about company valuation issues: one of the main questions is “Do I need a valuation expert with experience valuing companies in MY industry?”

Well the answer is yes and no. For the most part a person who specializes in valuing businesses knows how to value most types of companies. Many of the same valuation methods apply to a manufacturing companies, professional services firms or product distributors.

The valuation expert looks at three approaches: Asset Approach, Income Approach and Market Approach. In short the analyst will look at the assets, liabilities and equity of the firm for the asset approach. The income and expenses in an income approach or other market transactions in your industry for the market approach.

Essentially other companies who have been bought or sold in recent years. So no matter what you do, or service you provide the valuation methods are similar. So someone who is accredited in valuation theory will understand how to value most companies.

That being said there are times when you may want someone with experience in your industry. Life Sciences companies, hospitals, and emerging technology firms are some examples of when you would seek out a professional who specializes in these fields.

So it is good to question an expert about their experiences — but also question them about their valuation credentials. This factor may be of more importance.

If you own a small business and would like to learn more about business valuations, how to sell your company, how to value a company, or how to find a qualified business valuation expert, visit our website at http://www.ValuationstLouis.com or check out our videos at http://www.YouTube.com/businessvaluationstl

Fraud Expert St. Louis: When Do I Need a Forensic Accountant or Fraud Examiner? ACFE.COM

Fraud Expert St. Louis: When Do I Need a Forensic Accountant or Fraud Examiner? ACFE.COM Small business owners who suspect fraud should seek an expert for a fraud investigation to verify losses.

Small business owners always have questions about fraud issues: one of the main questions is “if I suspect fraud in my company — do I need a forensic accountant? How do I find a fraud expert?” Most business owners don’t know where to begin when looking for an expert to help them with the business losses resulting from employee theft.

First I would discuss this situation with your accountants, attorneys and advisors. They may know some fraud experts in your area and can direct you to the right people. There are times when your insurance may cover the costs of an expert to quantify the losses. Second — not all fraud investigations are conducted by forensic accountants per se. This is just a widely used term.

Many fraud experts have a background in finance or accounting but will usually become accredited in forensic investigations by a 3rd party organization such as the ACFE or the Association of Certified Fraud Examiners. The certification process involves higher education requirements as well as experience, completing an exam process and high moral standing.

Check out resources such as http://www.acfe.com to find a fraud expert in your area. If you own a small business and would like to learn more about small business fraud, how to value a company, or how to find a qualified forensic accounting expert, visit our website at http://www.ValuationStLouis.com or check out our additional videos at http://www.YouTube.com/businessvaluationstl (314) 541-8163

Estate Valuation Expert St. Louis: How Do I Gift Shares of a Family-Held Business?

Estate Valuation St. Louis: How Do I Gift Shares of a Family-Held Business? Large and small business owners always have questions about company valuation issues: one of the main questions is “how do I gift shares of my company’s stock?”

Many people are talking about the estate tax exemption and how it can help business owners transfer shares of stock to family members. But most of the time owners don’t know how the process works.

First, you may want to consult with an estate tax attorney and see if you qualify for the exemption and if you need to create another entity for the transfer — such as a family limited partnership or FLP.

Then you will need to hire a business valuation company to value your operations. This will give you an idea of how much of the company you can gift and still stay within the exemption. Staying within the exemption is important because then you won’t be paying taxes on the gift.

Finally you will want to determine if you need to keep control of the operating company. This will determine whether you gift non-voting or voting shares of stock. Again an experience elder law or estate planning lawyer can help you understand these issues as well.

If you own a small business and would like to learn more about business valuations, how gift shares of your company, or how to find a qualified business valuation expert, call us at (314) 541-8163, visit our website at http://www.ValuationstLouis.com or check out our videos at http://www.YouTube.com/businessvaluationstl

Lawyers and Attorneys St. Louis: Rules of Thumb on How to Value a Law Firm

Melissa Gragg – Valuation Expert (314) 541-8163 Lawyers and Attorneys St. Louis: How to Value a Law Firm – Rules of Thumb for determining the value of a law firm are 40 to 100 percent of annual revenues.

Lawyers and attorneys always have questions about how to value a law firm when selling shares to a new partner. Most owners want to know: What is the value of a law firm or what is a law firm worth?

There are times when the main lawyer of the firm is ready to sell some of the shares in the company to other younger attorneys or maybe an older attorney would like to be bought out of the firm. The question is how do you value a law firm? Sometimes rules of thumb are used by small business owners to get a range of value for the company.

The “rules of thumb” are simply a guide. Traditional valuation methods incorporate much more analytical thought and a review of historical financials, business operations, economic factors, industry projections and more.

But sometimes a lawyer just wants a simple idea of the value of the law practice. For example the rules of thumb for law firms are: the value is in the range of 40%-100 % of revenue. That means if the law firm earns $1 million dollars in one year then the value of the law practice could be anywhere between $400 thousand and $1 million.

I am sure you are thinking — that is a pretty big range — and you are correct.

This range doesn’t take into account the specific law firm’s financials, type of practice, number of clients, or professional goodwill, that is…the goodwill or reputation of the individual attorneys and lawyer. It is only a simple guide, that can sometimes misconstrue the true value of the company — if a proper business valuation were conducted.

You see business valuation experts only look at rules of thumb to get a ballpark range of value and typically don’t rely on these rules in an actual valuation engagement. You can see why a law firm may want to consider hiring a business valuation expert when selling shares of the company to new partners.

If you own a successful small business, law firm or law practice and would like to learn more about business valuations, how to value a law firm, or how to find a qualified business valuation expert, visit our website CLICK HERE or check out our additional videos at http://www.YouTube.com/businessvaluationstl  Email us at valuationstlouis@gmail.com for additional information.

St. Louis Small Business Fraud Prevention Tip: Separation of Duties

Small Business Fraud Prevention Tip: Separation of Duties

Small business owners always have questions about how to prevent fraud in their daily business operations. Most owners want to know: What do accountants and CPAs mean when they urge business owners to maintain a separation of duties?

Well, separation of duties means that you are not putting all of the financial responsibility of your company into the hands of one person — you are separating the duties among many people. This is so that one person will have to check another person’s work.

As a small business owner you want to prevent the OPPORTUNITY that any one employee could access cash or the bank accounts without any supervision.

Take for example an employee in the accounting department that has the ability to write checks, sign the checks and then also reconcile or balance the bank account every month. What have you created? The OPPORTUNITY for this employee to TEMPORARILY BORROW money. It doesn’t mean someone won’t steal from you, there are honest people out there. But if you eliminate the OPPORTUNITY for the employee to steal, then you are protecting your company.

So have one person write checks, have a different person sign the checks and have another person reconcile the bank accounts. Now if you do not have that many people in your company — then at minimum have the bank statements sent to your HOME address. Take a look each month and see if anything seems wrong or questionable.

If you would like more information on how to prevent fraud in a small business, company valuations, or how to find a forensic accountant check out our YouTube channel at http://www.YouTube.com/businessvaluationSTL