New Jersey Business Valuations
In a world where business relationships are constantly changing, the need to have a business valued or appraised arises often. There are many reasons why you may require a business valuation. They include:
- Mergers and Acquisitions
- Estate and Gift Taxes
- Stockholder Disputes
- Buy-Sell Agreements
- Statutory Requirements
- Partnership Dissolutions
- New Partner Admissions
- Damage Assessment
Every New Jersey business valuation accountant at our firm possesses analytical skills, information gathering expertise, and the sound business judgment needed to approach a valuation assignment. Their extensive experience and hands-on training provide them with the tools to competently appraise every type of business.
Each business is unique in its particular market, its competitive environment, the experience of the management team, its national or regional economic influences, and its financial history. Because these internal and external factors influence the value of the business, the valuation process is often complex and involved.
There are three approaches to valuing a business, each approach containing several valuation methods. There is more than one standard of value which must be considered for each engagement. Typically what is being appraised and the context of the appraisal will determine the appropriate standard of value. In most cases where a litigation is involved, for example, fair market value or fair value are usually the most appropriate standards of value.
A Complete Range of Services for New Jersey Business Valuations
A Comprehensive Valuation. Our most extensive service, designed to provide an unambiguous opinion as to the value of the business, business interest, or security. It is supported by all procedures that the appraiser deems to be relevant to the valuation.
A Limited Valuation. The next step down from comprehensive business valuation, as it lacks the performance of additional procedures that are required in an appraisal. This type of assignment can be considered to be an "agreed upon procedures" appraisal that should only be used in circumstances where the client is the only user of the appraisal.
A Calculation. The lowest level of engagement, where the appraiser is to provide an approximated indication of value based upon the performance of limited procedures agreed upon by the appraiser and the client.
Economic Damage Calculations. Provided for quantification of the loss incurred due to breach of contract, wrongful death, personal injury, wrongful termination, sex or age discrimination, patent infringement, or any other type of litigation requiring this type of service.
New Jersey Litigation Support Services. Include expert testimony, review of other appraisals, critiques of other reports, deposition, and trial questions for opposing experts and the provision of visual aids at trial.
Forensic Investigations. Provided for income and asset determination and tracing, and are an essential component of our services.
A CYA report. An opinion letter as to whether or not a full valuation is required. This report is ideal for the attorney who is unsure if a company has any value and wishes to "cover your assets".
Business Valuation FAQs
Why do I need a business valuation?
There are many reasons to have a business valuation prepared by a New Jersey Business Valuation Accountant. The main purpose is that a valuation can memorialize the value of your company at a specific date. Obviously, this is very useful for many reasons. Mainly valuations are used in the following ways; establish a value for partners coming into or leaving the firm, a buy-sell agreement, a marital dissolution, estate planning, gift tax planning, litigation support, bank funding, ESOP valuation, mergers, acquisitions and shareholder and partner disputes.
What are the benefits of a business valuation?
When you least expect it, having a good understanding of the value of your partnership or business will become very important. If you are about to get married, it is important to have the value of your business before the date of marriage in order to establish value, in the event the marriage does not last. If you are bringing in a partner or selling shares of stock, it is important to have a business valuation in order to understand whether or not what you are being paid is appropriate. There are many benefits to a valuation, but the important thing is to have a business valuation at specific dates so that the value is memorialized.
When should I have my business valuated?
Valuations take time and it is generally better to have a valuation prepared on or before key milestones in your business. Some of these milestones are bringing on a partner, selling stock to an investor or marriage. It is best to consult with a New Jersey Business Appraiser if you think you need a valuation.
What is included in a business valuation?
In order for an appropriate business valuation a New Jersey Business Valuation Accountant needs to prepare and include specific required analysis in the report. Even though the appraiser will have a conclusion of one specific value for your business in the report, he typically looks at the cash flow of the company, the net asset value, and applicable multiples. Using the information gathered from these three methodologies the appraiser will then come to a conclusion on the final value. In order for the appraiser to become familiar with your business he will look at economic conditions, the management and set up of the company and review the industry the business operates in. A business appraisal includes some business analysis you may think would not be important to an appraiser such as obtaining key contracts, pricing lists and analyzing competitors. A business appraisal is usually very comprehensive and covers many different aspects of your business and industry.
What types of intangible assets can be used to calculate the value of a business? Historically tangible assets have been the most important and valuable aspect of any company. In the early 20th century companies such as General Motors, Ford and General Electric all had extensive tangible assets, such as plants and equipment. Now in the 21st century that has all changed. For many companies, their most valuable asset is intangible, such as a name like Facebook, or the source code to Google’s algorithm. These intangibles are worth billions of dollars. When valuing even a small business you can have intangibles such as patents, trademarks, copyrights and other intangible assets. In any valuation your New Jersey Business Appraiser will take a look at your intangible assets and place a value on them based on several techniques.
What kind of documents do I need to provide for a business valuation?
Your New Jersey Business Valuation Accountant will need several basic documents such as five years of tax returns and financial statements, management structure, a narrative that includes a description of the company’s industry and history of the business. These documents are usually a good place to start.
What is the difference between a business valuation and a business appraisal?
There is no difference between a business valuation or business appraisal. The terms are used interchangeably, and the service provided under each is dependent on the purpose of the valuation or appraisal.
What types of “value” are used when calculating business valuations? (include references to fair market value, fair value, and investment value)
The same business can be valued at different prices depending on the type of valuation and the value that the appraiser is applying. For example, the book value of a company is simply based on subtracting the liabilities from the assets. The liquidation value is the value that the business would actually be able to sell those assets at. As we know, when you are forced to liquidate you usually will receive a lot less than what you would normally get if you took your time to sell those assets. These are two examples of how the value in an appraisal can differ even though it is the same company.
Three types of values that are typically used in appraisals are investment value, fair market value, and fair value. With investment value a purchaser of a company is willing to pay more than a company is worth because they have some type of competitive advantage. Fair market value is what a seller and buyer would pay with each knowing all the facts about the company. Fair value is usually a value that is based on a state statute and has specific guidelines on how to calculate that value. Obviously, this area of valuation is extremely complex and that is why a New Jersey Business Appraiser can assist you in deciding which type of value is best for your needs.
Can my ownership interest be valued if I want to sell my business?
Yes, your ownership in a company can be valued no matter what the actual percentage. If you are a majority owner or minority owner your value can be calculated by a New Jersey business valuation appraiser. Of course, depending on your circumstances, you may be subject to a minority discount or control premium.
What are the different business valuation approaches?
There are three main approaches to a business valuation, they are the asset approach, the market approach and the income approach. A New Jersey Business Appraiser will use all three when valuing your company. The main difference between these three approaches is that one relies on comparable type businesses and what they sell for in the market, while the income approach actually calculates the cash flow the owner is expected to receive from the business. The asset approach simply values the current assets of the company.
What are the types of small business valuation methods?
Surprisingly, small businesses are subject to the same approaches and methodologies used to value larger companies. The three methodologies are the asset approach, the income approach, and the comparable company approach. The main difference is that many small businesses will sell at a multiple of the company sales or owners expected compensation. For example, there are specific rules of thumb for some businesses such as coffee shops, bagel stores, dental practices and gas stations. If the going rate for your business is five times sales, that is how your business will be valued. Obviously, each business is unique and different and would have to be investigated by a New Jersey business valuation appraiser, but multiples are a big part of valuing small businesses.
How is a small business appraisal different from a larger company appraisal?
The main difference between a small business appraisal and a large business appraisal, is that small companies usually have much less information that is accurate and available. In small businesses sales are usually understated and expenses are overstated. That is why most small businesses are valued using industry rules of thumb that are applied to the sales or net income. By using a multiple for a small business, it takes into account that income may be understated, and expenses overstated.
Should I have my business equipment appraised?
New Jersey Business Appraisers may value your equipment or bring in an outside specialist if needed. The two main reasons businesses have their equipment appraised are for either financing or insurance purposes. Also, as part of a business valuation equipment is appraised, if it is a relevant issue on the total value of the company. Equipment appraisals are not recommended unless there is a specific need.
Do I need a full valuation or an estimate of value?
Depending on the purpose of the valuation you may be able to reduce the time spent on the valuation by selecting a lower level service. New Jersey Business Valuation experts offer a variety of valuation services that can fit your needs and price point.
What is a business valuation calculator?
In order to have a truly professional and accurate valuation of your business there can be no shortcuts. There is some misinformation online concerning the ability to appraise your business using a valuation calculator. Unfortunately, these are generally a complete waste of money and time.
Is there a business valuation formula?
There is something called rules of thumb that has been used for decades in order to get an idea of what a typical business is worth in specific industries. Sometimes you will see business salespeople advertise specific valuations on companies using these rules of thumb. Sometimes rules of thumb can be helpful, but most businesses have a unique aspect that must be considered in order to find the true value of the company.
How long does a business valuation take?
In order to a appraise your business a New Jersey Business Appraiser needs to obtain many documents, research the industry, the current economic environment, review the businesses assets and interview key employees and management. Obviously, this takes a good amount of time. The best way to reduce the amount of time a valuation takes is to be as organized as possible and have specific documents ready for review once the valuation begins.
Why should I hire a New Jersey business valuation accountant?
New Jersey Business Valuation Accountants offer a variety of business valuation services. Experienced business appraisers have years of knowledge accumulated by working on dozens of business appraisals. New Jersey Business Valuation Accountants lead the country in many aspects of valuation and can provide you the highest and best level of services.