Business Valuations Denver & Colorado, Statewide
The Company Broker Group creates value to our clients, their advisors and the community through professional expertise, clear and timely communication, superior service, and the delivery of quality work product.
What is your business currently valued at? We provide professional business valuations for business sales, gift or estate tax, divorce, shareholder disputes, etc, etc.
A business valuation represents the value of a company at the time of that valuation, and for that particular purpose. The factors that decide a valuation are referred to as “the standard of value” and the “purpose of the value”.
Based on these factors, the same business can have more than one legitimate valuation. For example, at the same time, a business can have one value for estate tax reporting, one value for the sale to a consolidator and one value for for equitable distribution in a marriage dissolution or partnership buyout, etc.
Price should be considered separately from value– Price is a subjective value and best described as – “a negotiated amount between two parties for a specific transaction”. The various participants in the sale may have different goals for the transaction.
The different valuation methods are specific ways of determining the value of a business for the specific end use. The three traditional valuation approaches are “the assets approach”, “the income approach” and “the market approach”. These methods involve evaluation and consideration of specific factors including:
- The type of the business
- Business’ history
- The current market
- the industry outlook – as it impacts the company being sold
- The company’s financial state
- Earning and dividend paying capacities
- Any goodwill or intangible assets of the business.
As part of the process it is also necessary to consider prior sales of interests in the business, as well as the size of the interest and market data available. These considerations were first detailed in “ Revenue Ruling 59-60“, they are accepted as standard factors in valuation analysis.
If you need more information about having your business valued, call Company Broker Group, (CBG) at 303-522-2034, or email us for more information.
Business Valuations Denver: Asset Approach
“The asset approach values the underlying assets of the business to determine the business value. This valuation method carries more weight with respect to holding companies than operating companies.”
“Also, asset value approaches are more relevant to the extent that a significant portion of the assets are of a nature that could be liquidated readily if so desired. Revenue Ruling 59-60 directs that the book value of stock be considered and that the appraiser consider the value of intangibles and goodwill. The liquidation method, under the asset approach, is considered in cases where the owner of the subject interest has the ability to cause liquidation of the enterprise.
As an indicator of the total value of the entity, the net asset value method, using the book value has the disadvantage of only considering the status of the business at one point in time. Additionally, book value does not properly take into account the earning capacity of the business or any intangible assets that have no historical cost. In many respects, book value represents the minimum benchmark value of an operating business.”
Business Valuations Denver: Income Approach
“There are two general methodologies under the income approach – the discounted future returns methodology (the multi-period model) and the capitalized future returns methodology (the single-period model).
The three key variables needed to apply each of the methods are (1) the amount of the future returns, (2) the Company’s cost of capital in generating those returns and (3) the timing of the future returns.
In transactions pertaining to closely held businesses, buyers generally are most concerned with the company’s ability to generate profits or future returns and the risks associated with the continuation of those profits. The theory behind this method of valuation is that the purchaser of a business interest expects to receive a stream of future earnings, or more specifically, the cash generated from these earnings, adjusted for the cash required to provide the working capital and capital expenditures needed for future operations.
The income approach estimates value based on the earnings capacity of the company. This approach evaluates the present worth of the future economic benefits that accrue to investors of the business. These benefits, future earnings or cash flows, are discounted to present value at a rate of return that is commensurate with the company’s risk. This present value determines the value of the operating component business.”
Business Valuations Denver: Market Approach
“Lastly, the market approach compares the Companies to companies in the same or similar industry. The approach involves the gathering of information and valuation multiples, based on recent sales of comparable business and using this data to develop an industry multiple to utilize as a proxy in developing an indication of value for the Companies.
The Guideline Public Company Method, is based on the underlying premise that market transactions of publicly traded stock for companies similar to a subject company, provide empirical evidence of value.1 The advantages to using public comparables as a benchmark for value are the available of information regarding operations, industry risk, anticipated growth and observable valuation measurements. Additionally, this method is strongly advocated in Revenue Ruling 59-60.
In applying the Guideline Public Company Method, the appraiser searches for potentially comparable companies and identifies similar companies to the subject company. Once potential comparables have been identified, they must be analyzed to determine if they have similar risk characteristics, line(s) of business, markets served, types of products, geographic territory served, size and comparability of financial history.
If a sufficient number of suitable companies are identified, those companies’ financial history is analyzed to determine if any adjustments are necessary for differences from the subject company. Value multiples are computed for each comparable company. Based on the unique aspect of the subject company, the appraiser selects one or more multiples to apply to a base to arrive at an indication of value. Throughout this process, the appraiser must also consider the standard of value, the ownership characteristics, any going-concern issues and the type of company in arriving at a conclusion using this method.
A Business Valuation based on private transactions works by using prior transactions as an indication of market trending. There are several ways to track private transactions – Pratt’s Stats, BIZCOMPS’ and the Institute of Business Appraisers Transaction Database. The system is based on principle of substitution, that the value of a business is no more than the cost of acquiring an acceptable substitute.
The Private Transaction Methodology is similar to the Guideline Company Method, but with an important difference. In the guideline company method, several publicly traded companies (usually a very small number) are selected as being similar to the target business and then a value is developed for the company based upon the current stock prices of these publicly traded companies.
Using Private Transactions, all transactions for which market data is available are considered as a statistical ensemble that defines the market for businesses of the same general type. Based on the financial analysis that is a part of the valuation process, the appraiser benchmarks the company compared to the market in evaluating the appropriateness of the methodology and then selecting and applying one or more multiples.
The challenge of using the market approach is to find comparable companies or transactions, similar enough to the business being valued to provide an indication of value. If a business has non-operating net assets, they are added to the values resulting from the income and market approaches.
Once indications of value have been derived from applicable methods, considering the foundational concepts regarding the economy and industry and the characteristics of the business, the values are then reconciled to arrive at a either a single value or range of values for the business interest. In this process it may be appropriate to apply discounts for marketability (illiquidity), minority interests (lack of control) or key person discounts. In some cases premiums may apply for control.
Buying or selling a business can be a frustrating experience. Without a solid knowledge of business sales, it can take years to even connect the interested parties in a transaction. Buyers can get lost in the maze of purchasing options, time-sensitive evaluations, and legal issues. Sellers can become anxious and under-price their own properties.
Over the years Company Broker Group has built a large network with many business brokers and business owners. Company Broker Group is affiliated with many experienced and successful business brokerage firms in Colorado and together we have the necessary resources to assist our clients that are looking for an exit strategy. With Company Broker Group, buyers and sellers receive personal and professional attention that can help to remove the clouds of uncertainty and anxiety by walking each prospective interest through the entire buying or selling process to arrive at the desired end; the purchase or sale of a business.”
What do we do for our clients?
Our Valuation & Marketing Services Include:
- Business valuations, financial and operational analysis
- Broad marketing of your company – via print media, online media and direct-mail campaigns
- Creating custom marketing materials, including a detailed “offering memorandum booklet”
- Screening acquisition candidates
- A total “due diligence support package”
- Ongoing negotiation of all terms of the deal, on the seller’s behalf
- Help with creative financing solutions and overseeing the closing of the transaction – with the buyer, sellers, attorneys, CPA’s, financial planners, lenders and landlords.
Do I really need a professional business broker?
It might appear easy to find your own buyer for a plumb business, but it’s a big world and reality often proves to be more difficult. Having a professional Denver business broker do all the supportive work for you and represent you will yield you a number of advantages:
√ A Professional, Denver Business Broker will be the one to negotiate the sale of your business. If you have to be the one checking up on the buyer’s interest, then you will be the one lowering your sale price! Let us be the ones to maximize the potential worth of your business.
√ Even if you devoted full-time to selling your business, as a non-broker, you can contact just so many people on your own. Even if you canvas all the business brokers you can find – through your resources, you can never find the number, and quality, of contacts that a professional gleans over two decades of full-time brokering. However, signing up with us entitles you to be listed on our confidential Business Broker Multi-Listing Service. Hundreds of brokers will be notified of your deal. Interest in purchasing your business will increase exponentially as a network of potential buyers are made aware of your business sale. You stand to gain a lot more as the competition for your business increases.
√There are always potential merger candidates in the market for your business. Our private equity buyers could be interested in your business. They can be “strategic buyers” or “financial buyers”. They could be chain builders and willing to pay a substantial premium over fair market value to add your territory to their range. Only tenured brokers have access to these kinds of prime buyers.
√You have expertise in running your business, not selling it. Let the experts in sales sell your business while you keep your business running smoothly and efficiently. You want your profits to stay high when you are marketing your business, to keep its value up. Let us sell your business while you keep it running strong and healthy.
√In the end, the sale is your indicator of whatever success happens. You need for the sale of your business to close successfully, and we have the proven track record to make it happen. Having successfully sold many businesses, we know how to get the job done so that you get maximum return for your effort.
About Company Broker Business Valuations
With our team of business appraisers and company valuation experts, we at Company Broker Group can prepare a business appraisal or business valuation of your company targeted toward the correct audience – partners, family members, shareholders, potential buyers, estate planning, lenders or potential equity investors. We have an appraisal product for every size business and price point. In addition, we have partners who have been appraising Inventory, Machinery and Equipment for many Years!
Business Valuations Denver & Colorado, Statewide