Valuation Program USMSSRichard Flom, CPA/ABV/CFF, CVA

What is your company worth?

Value depends on a number of different things:

1. Buyer2. Industry3. Profitability 4. Cash Flow5. Assets

A valuation is based on the future outlook of the business.

Buyer

Who would purchase your business?▫Individual ▫Strategic buyer

Generally pay more

Industry

What industry is your company in?▫Is the industry currently in great demand?

▫What effect does the economy have on your business? (Gov’t contracts with cutbacks in effect)

USMSS members generally provide sales, network, repair, and rental services.

Profitability and Cash Flow

Is your business profitable?

Does it have positive cash flow?

Assets

Does your company have assets that are undervalued on the books?

Values

Fair Market Value:

“The amount at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the seller is not under compulsion to sell, both parties having reasonable knowledge of relevant facts.”

Values cont’d

Fair Value▫Based on state law

Investment Value▫Business’s worth to that particular buyer

Intrinsic Value▫Value in the eye of the investor

Types of Valuations

•A Conclusion of Value (An Opinion)

•A Calculated Value

•An Oral Report

Valuation Approaches

1. Market Approach▫ Guideline company method▫ Transaction method▫ Industry Method – Rules of Thumb

Valuation Approaches

2. Asset Based Approach▫ Adjusted book value method▫ Liquidation value method▫ Cost to Create Method

Valuation Approaches

3. Income Approach▫ Capitalization▫ Discounting

Discounts▫ Marketability▫ Minority▫ Small Company discount (size related)▫ Key Person discount

Premiums▫Control premium

What should a valuation cost?