An Accredited Valuation Analyst (AVA) is a valuation professional who has completed specialized advanced training in business valuations through the National Association of Certified Valuation Analysts (NACVA) and who has also completed a comprehensive examination and submitted a complete written valuation report to examiners. AVAs receive continuing education in valuations each year and observe the … Continue reading Top 10 Questions of Value : 5. What Are the Qualifications of an Accredited Valuation Analyst and a Certified Business Appraiser?
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Top 10 Questions of Value: 4. What Is Goodwill?
Goodwill is defined as the intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. The notion of goodwill has existed since mankind first entered into commercial activity. In ancient Egyptian bazaars, merchants knew the location closest to the city gates would provide the best opportunity … Continue reading Top 10 Questions of Value: 4. What Is Goodwill?
Top 10 Questions of Value: 3. Are Business Valuations Needed for Gift and Estate Tax Purposes?
Yes! Business valuations are a must for estate and gift tax purposes. Estate valuation principles relating to business interests are in Regs. 20-2031-2 (f) and 20-2031-3. Gift tax valuation principles relating to gifts and bargain sales of a business interest are in Reg. 25.2512.3. Valuations for estate tax purposes are critical because the valuation determines … Continue reading Top 10 Questions of Value: 3. Are Business Valuations Needed for Gift and Estate Tax Purposes?
Top 10 Questions of Value: 2. What “Discounts” Are Applicable When Gifting a Business Interest?
Generally there are two discounts considered in the valuation of a closely held business: 1) Lack of Marketability (Liquidity) and 2) Minority Interest (Lack of Control). The marketability (or liquidity) discount will apply in most valuation situations of privately-held companies. The data used in developing the appropriate discount or capitalization rate applicable to the subject … Continue reading Top 10 Questions of Value: 2. What “Discounts” Are Applicable When Gifting a Business Interest?
Top 10 Questions of Value: 1.What Is the Capitalization of Earnings Method?
In its simplest form, the Capitalization of Earnings Method provides an estimate of value of a company by converting the future income stream into value by dividing by a capitalization rate that incorporates a required rate of return for risk assumed by an investor along with a factor for future growth in the earnings stream being … Continue reading Top 10 Questions of Value: 1.What Is the Capitalization of Earnings Method?
7 Deadly Sins of Startups from a Valuation Perspective: No Risk/Return Analysis
One of the most difficult considerations for an entrepreneur is the risk/return analysis of the potential business venture. An incomplete or poorly-reasoned risk/return analysis on the part of the entrepreneur may lead a savvy financial investor to turn down a potential investment in the business in favor of an apparently less risky opportunity. Even in … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: No Risk/Return Analysis
7 Deadly Sins of Startups from a Valuation Perspective: Unrealistic Growth Expectations
Planning for too little growth and trying to play catch up when growth exceeds expectations creates a number of challenges, such as the need to expand operations and capacity and the resulting requirement for capital expenditures and potentially, additional financial resources. However, planning for too much growth is just as bad, if not worse, in … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Unrealistic Growth Expectations
7 Deadly Sins of Startups from a Valuation Perspective: Lack of Startup Managerial Experience
While many startup entrepreneurs have experience in a corporate setting, few have had experience actually running an entire operation on their own. In a corporate setting, there are already established relationships, financial resources, and managerial depth across other key functional areas of the business. Usually, in a corporate setting, the functional areas are also managed … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Lack of Startup Managerial Experience
7 Deadly Sins of Startups from a Valuation Perspective: Operating On Shoestring Budget/No Working Capital
Too often, entrepreneurs believe the business will quickly generate enough cashflow to sustain operations and, thus, enter into the new business with insufficient financial resources. They may try to operate on a shoestring budget until the business reaches cashflow break-even out of necessity due to a lack of access to additional financial resources. This may … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: Operating On Shoestring Budget/No Working Capital
7 Deadly Sins of Startups from a Valuation Perspective: No Break-even Analysis
A key part of the financial projections and business plan is for the entrepreneur to conduct a break-even analysis. The traditional break-even analysis reveals what level of sales a business must achieve to cover both the variable costs (cost of goods sold) and the fixed costs (overhead), resulting in $0 profitability. Beyond the break-even point, … Continue reading 7 Deadly Sins of Startups from a Valuation Perspective: No Break-even Analysis
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