Why do you need a business valuation report?

There are many reasons that you may need a business valuation report.  Identifying the purpose of the report is the cornerstone to the entire process.  The purpose determines the scope, methodology, and level of detail required to meet the specific needs of the situation at hand.  Here are some of the more typical needs for a business valuation report:

A business needs a business valuation report if they want to sell their business for several important reasons:

1. Establishing Fair Market Value: The valuation report provides an objective assessment of the business's worth, ensuring that the asking price is in line with the market value. This helps prevent underpricing or overpricing the business.

2. Attracting Buyers: Potential buyers are more likely to consider purchasing a business if they have access to a thorough and professional valuation report. It provides transparency and builds trust by showing that the business has been evaluated by an expert.

3. Negotiation Tool: The valuation report serves as a solid foundation for negotiations between the seller and potential buyers. It offers detailed insights into the business's financial health, assets, liabilities, and earning potential, which are critical points during negotiations.

4. Identifying Strengths and Weaknesses: The valuation process often highlights the strengths and weaknesses of the business. This can help the seller address any issues before putting the business on the market, potentially increasing its value and attractiveness to buyers.

5. Financial Planning: For the seller, knowing the precise value of their business aids in financial planning, including retirement planning, investment decisions, and tax implications.

6. Legal and Compliance Requirements: In some cases, a formal business valuation is required by law, especially if the sale involves shareholders, partners, or regulatory bodies. It ensures compliance with legal and financial standards.

7. Facilitating Financing: Buyers often seek financing to purchase a business. A comprehensive valuation report can assist lenders in assessing the risk and deciding whether to provide financing, thus making the sale process smoother.

8. Clarifying Business Potential: A valuation report includes projections and analyses that can illustrate the future potential of the business, making it more appealing to prospective buyers who are interested in growth opportunities.

Overall, a business valuation report is a critical tool that aids in the successful sale of a business by providing clarity, transparency, and credibility to both the seller and the buyer.

Once we have determined the purpose of the report, we can determine the type of report you need.  In general, there are two different types of reports:

Informational reports

Common Uses:

·         Buying a business

·         Selling a business

·         Partner buy-in/buy-outs

·         Exit planning

Certified reports

Common Uses:

·         Gift / estate planning

·         Employee benefit plans

·         Litigation

·         Partner dispute resolution

·         Bank loans

·         Divorces

Here are descriptions of the most popular and valuable specific reports available:

Standard reports

Standard Valuation Report

§  Prepared by a Qualified Valuation Analyst, this 35+ page informational report includes additional analysis to more accurately establish a market price for selling a business or supporting internal planning decisions. Ideal for individuals who want a more in-depth report, including comparable transactions and industry benchmarking analysis, but do not require the level of analysis included in a certified report.

·         Ready in 5 business days

·         Suggested retail price:  $3,500

Standard + CIM Bundle

§  The bundle includes the 35+ page Standard Valuation Report designed for individuals who want a more in-depth report, including comparable transactions and industry benchmarking analysis. Plus it also includes a professional-grade, 20+-page Confidential Information Memorandum designed for marketing a business for sale to potential buyers.

·         Ready in 10 business days

·         Suggested retail price:  $5,500

o   For a sample report, click here:  [link to Standard valuation report sample]

Or

·         Click here to see what a Confidential Information Memorandum looks like:  [link to CIM sample]

Certified reports

Certified Summary Valuation Report (<$5M)

§  Prepared by a NACVA Certified Appraiser, this 65+ page certified valuation report is ideal for more complex business acquisitions and divestitures, estate planning, partner disputes and bank loan reports when substantiating information is needed to be presented to third parties. Summary reports can be easily read by non-financial professionals who need to quickly understand the valuation of the company.

·         Ready in 20 business days

·         Suggested retail price:  $7,500

Certified Summary Valuation Report ($5-10M)

§  Prepared by a NACVA Certified Appraiser, this 65+ page certified valuation report is ideal for more complex business acquisitions and divestitures, estate planning, partner disputes and bank loan reports when substantiating information is needed to be presented to third parties. Summary reports can be easily read by non-financial professionals who need to quickly understand the valuation of the company.

·         Ready in 20 business days

·         Suggested retail price:  $8,500

o   For a sample report, click here [link to Certified valuation report sample]

Start the Process with a Free Consultation

Your engagement starts with a free consultation to discuss your valuation needs.   Let’s talk about your needs and how we can best help you!