Business Valuation Services
We deliver each of our services through a team of financial professionals and business valuation specialists who adhere to the highest standards of our industry. And when you become a DMJPS client, everyone on our team works for you.
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Business Valuation Services: How Much Is Your Company Worth?
Do you know what your company is worth? A company is not worth a single estimate of value but several estimates, each correct in its respective purpose.
As part of the business valuation appraisal process, privately held companies are valuated for several reasons:
- Mergers and Acquisitions
- Succession Planning
- Gift and Estate Tax
- Divorce
- Stockholder Disputes
- Buy/Sell Agreement
- Business Planning
- Employee Benefits and Stock Ownership Plans
- Economic Damages
- Goodwill Impairment
Each of the various reasons has specific valuation objectives, procedures, and risks – risks that could have serious consequences if not properly addressed. Through DMJPS’ business valuation services, you will receive an independent, objective, well-documented valuation that can help meet your needs and reduce the risks.
Why are business valuation services necessary?
Business valuation specialists estimate the value of a company through three general approaches – income, market, and asset. Under each approach, various valuation methods are available. Generally, for businesses that sell goods or services, the income and market approaches are the most appropriate in that the value of these companies is captured in the cash flows from operations. For holding companies, companies that own real estate or marketable securities, the asset approach is the most appropriate in that value of those companies is in their underlying assets.
However, having a business valuation appraisal is much more than just running the numbers; It requires an in-depth analysis of factors such as industry, current economic reporting, and company operations to quantify risks – risks that could have a material impact on value.
Business Valuation Services for Privately Held Companies
Valuing a privately-held company is no different from valuing any other asset – it assesses risks and returns. As a frame of reference, Ibbotson Associates reports that the highest average total return securities investments between 1926 and 2003 are the small company stock asset class at 17.5%. That class also had the highest risk, defined as the variation of returns. Privately held companies have additional risks over their publicly traded counterparts. They generally do not have the following – SEC oversight, the level of sales or total asset size, or the diversity in both product lines and geographic areas. All of these are additional risks that business valuation services consider.
Additionally, unlike their publicly traded counterparts, privately held companies cannot access national public stock exchanges to buy or sell their interests. This lack of national markets translates into the additional risk that an investor may be unable to liquidate their investment without delay or loss in value.
Other important parameters that business valuation services provide are the valuation date, the premise of value, and the ownership interest being valued. The importance of the valuation date is quickly apparent when considering the impact on the value of companies in the travel industry post-9/11 or during the COVID-19 global pandemic. The premise of value is that the company will either be valued as a going concern or in liquidation – is it worth more dead than alive?
Finally, ownership interest is significant because a minority interest is generally worth less, usually substantially less than its pro-rata amount. That is because, as a minority interest stockholder, you cannot compel management to act in any way to increase your return on investment – higher salary if you are an officer, to start or increase dividends, or to liquidate assets and distribute the proceeds. The market recognizes this and discounts the minority interest accordingly.
A Trusted Partner for Business Valuation Services
While the business valuation appraisal process is complex, it’s a valuable tool for understanding your business’s worth and gaining insights on strategically boosting its value. DMJPS is a trusted leader in this area, serving greater North Carolina and the Southeastern United States.
For more information about how our services can help your business, please contact us to schedule an initial consultation with a business valuation specialist.