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Business Quest Brokers
What is your Southern California
Business Worth?
A business is valued on what it earns, how reliably it earns, and an estimate of future earnings. The analysis starts with adjusted earnings, weighs customer concentration, evaluates depth of the management team, and compares against what similar businesses have sold for.
Do you need an opinion of value or a formal appraisal?
An opinion of value is enough when you are deciding whether to sell and what to ask. A formal business appraisal will provide all stakeholders with the confidence and comfort that the business is being given a fair market value.
Common reasons for a formal appraisal:
Partnership buyouts: One partner is leaving and the remaining partners are buying the interest. A certified appraisal gives both sides a defensible figure and keeps the disagreement from becoming a lawsuit.
Divorce: The business is usually the largest marital asset and the most contested. Opposing counsel will scrutinize the valuation, and a report that shows its methodology holds up where a summary figure does not.
Estate and gift tax: The IRS requires supportable valuations for transfers of business interests. A formal appraisal documents how the value was determined and what discounts, if any, were applied.
Buy-sell agreement funding: Buy-sell agreements are only as good as the valuation behind them. Whether you are drafting one or funding it with insurance, the coverage amount has to be based on a current number.
SBA and bank financing: Lenders require an independent business valuation on most acquisition loans, prepared by a qualified appraiser rather than by a party to the transaction.
Litigation and shareholder disputes: Where value is the question in dispute, the report has to withstand examination and the appraiser has to be able to explain the analysis.
If you are not sure what you need, contact us and we will guide you through the decision.
What the appraisal includes
Our formal appraisals are prepared by a Certified Business Appraiser in accordance with national appraisal standards.
Calculation of Value: Applies agreed methods to the financial and operating information provided and states the result with the analysis behind it. This is the right choice when a more detailed summary report is not needed.
Summary Report: The summary report includes a full financial analysis, the three primary valuation approaches, the data relied on, and the reasoning laid out in writing for the final conclusion of value. This is what you want when the valuation will be examined by an opposing party, a lender, or the IRS.
How we arrive at a business' value
Every valuation starts with the financials. We review three to five years of financial statements and tax returns and normalize the earnings, removing discretionary expenses run through the business, and one-time items that will not recur under a new owner. What remains is what the business actually earns, which is generally not reflected on the tax returns.
From there we weigh the factors that determine what a buyer will pay for those earnings: customer concentration, the lease, the condition of the equipment, the depth of the management team, and how much the business depends on you personally. Those figures are measured against what comparable businesses have actually sold for, drawn from a database of completed transactions in the same industry.
Let's get started
Reach out to our team if you have any questions about buying, selling, or valuing a business.
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