{"id":2013,"date":"2017-04-28T06:08:53","date_gmt":"2017-04-28T13:08:53","guid":{"rendered":"https:\/\/www.keypersoninsurance.com\/?p=2013"},"modified":"2024-12-11T23:55:41","modified_gmt":"2024-12-11T23:55:41","slug":"business-valuation","status":"publish","type":"post","link":"https:\/\/webdesign.quoteplicity.com\/keyperson\/business-valuation\/","title":{"rendered":"The Factors Affecting A Businesses Valuation In Today&#8217;s Market"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"2013\" class=\"elementor elementor-2013\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-4fe57bb7 e-flex e-con-boxed e-con e-parent\" data-id=\"4fe57bb7\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-49f7bd60 elementor-widget elementor-widget-text-editor\" data-id=\"49f7bd60\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p class=\"bodytextSubtopic\">One of the initial requirements of <a href=\"https:\/\/www.keypersoninsurance.com\/succession-planning\/\" target=\"_blank\" rel=\"noopener\">effective business succession planning<\/a> is to obtain an accurate value for the company. Once a credible business valuation&nbsp;is established, the proper measures to protect the company and its owner\u2019s and shareholders can be identified.<\/p>\n<h2><strong>Some Business Valuation Facts<\/strong><\/h2>\n<ul>\n<li>Most business owners have no idea what the business is actually worth.<\/li>\n<li>Most business owners over or undervalue their business by at least 50%.<\/li>\n<li>A properly completed business valuation can establish the fair market value of the business <a href=\"\/taxation\/\">for tax purposes<\/a>.<\/li>\n<li>An accurate business valuation is a crucial in determining an individual owner\u2019s net worth which is essential for estate planning.<\/li>\n<\/ul>\n<p>Most business valuations are based on what the company owns and what the company earns. The Internal Revenue Service outlines the acceptable factors for determining the value of any business as follows:<\/p>\t\t<div data-elementor-type=\"section\" data-elementor-id=\"5761\" class=\"elementor elementor-5761\" data-elementor-post-type=\"elementor_library\">\n\t\t\t<div class=\"elementor-element elementor-element-f0db84b e-flex e-con-boxed e-con e-parent\" data-id=\"f0db84b\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-4a2f2c0 btn-orange-outline elementor-widget elementor-widget-button\" data-id=\"4a2f2c0\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" href=\"https:\/\/appointments.zohosites.com\/\" target=\"_blank\" rel=\"noopener\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t\t\t\t<span class=\"elementor-button-text\">Book Consultation<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\n<h3>1. The Company\u2019s Earnings and Income History<\/h3>\n<ul>\n<li>How long has the company been in business?<\/li>\n<li>What is the growth rate of the company of the last 3, 5 and 10 years?<\/li>\n<li>What are the business\u2019s total assets?<\/li>\n<li>What are the liabilities of the company?<\/li>\n<li>What type of products and services are offered?<\/li>\n<\/ul>\n<h3>2. Comparing the Business to other Similar Businesses<\/h3>\n<ul>\n<li>How does the business perform compared to its competitors?<\/li>\n<li>When comparing companies, they must be similar in nature.<\/li>\n<li>When using the comparison approach, the price-earnings, price-book value and price dividend ratios of each corporation should all be identified.<\/li>\n<\/ul>\n<h3>3. What is the Company\u2019s Economic Outlook?<\/h3>\n<ul>\n<li>What are the economic trends of the industry?<\/li>\n<li>How does the company rank in terms of its competitors?<\/li>\n<li>What are the realistic growth rates for the company for the next 3, 5 and 10 years?<\/li>\n<li>What are the realistic growth rates for the company over the next few years?<\/li>\n<\/ul>\n<h3>4. What is the Company\u2019s Earning Capacity?<\/h3>\n<ul>\n<li>A company\u2019s earning capacity is its average earnings over a five-year period multiplied by a capitalization rate.<\/li>\n<li>Capitalization rates vary from industry to industry and change with changing economic conditions.<\/li>\n<li>Capitalization rates are usually based on price earnings ratios of similar publicly traded companies.<\/li>\n<\/ul>\n<h3>5. What is the Book Value of the Stock?<\/h3>\n<ul>\n<li>Book value is defines as the company\u2019s assets \u2013 liabilities.<\/li>\n<li>Book value business valuation is based on the owner\u2019s equity.<\/li>\n<li>The problem with the book value approach is that accounting records may not accurately reflect the true value of the assets of the business.<\/li>\n<\/ul>\n<h3>6. Goodwill and Other Intangible Values<\/h3>\n<ul>\n<li>Goodwill is an excess of net earnings above a reasonable return on the net tangible assets of a business.<\/li>\n<li>Goodwill is based on the earnings capacity of the company.<\/li>\n<li>An example of goodwill is a company\u2019s hard earned reputation.<\/li>\n<\/ul>\n<p>The best approach to valuing a business should be identified by your CPA, a competent tax advisor or experienced business appraiser. The point of emphasis is that a proper business valuation is crucial to planning for both business succession as well as the estate planning of the company\u2019s owners.<\/p>\n<p>Only after an accurate fair market value for the business is determined can the needs of the company and its shareholders be identified.<\/p>\n\t\t<div data-elementor-type=\"container\" data-elementor-id=\"5735\" class=\"elementor elementor-5735\" data-elementor-post-type=\"elementor_library\">\n\t\t\t\t<div class=\"elementor-element elementor-element-612d21b0 e-con-full remove-formatting spacing-medium e-flex elementor-invisible e-con e-child\" data-id=\"612d21b0\" data-element_type=\"container\" data-e-type=\"container\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;,&quot;animation&quot;:&quot;bounce&quot;}\">\n\t\t<div class=\"elementor-element elementor-element-76355623 e-con-full e-flex e-con e-child\" data-id=\"76355623\" data-element_type=\"container\" 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Rates<\/p>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-321c7710 elementor-widget elementor-widget-heading\" data-id=\"321c7710\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<p class=\"elementor-heading-title elementor-size-default\">See rates and benefits tailored to your business needs.<\/p>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-29d1ed8a btn-orange-outline elementor-align-center elementor-widget elementor-widget-button\" data-id=\"29d1ed8a\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" 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e-child\" data-id=\"1e74ae8d\" data-element_type=\"container\" data-e-type=\"container\" data-settings=\"{&quot;background_background&quot;:&quot;classic&quot;}\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-7211071b elementor-widget__width-initial elementor-widget elementor-widget-image\" data-id=\"7211071b\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"145\" height=\"26\" src=\"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-content\/uploads\/2024\/10\/5-star-yellow.png\" class=\"attachment-large size-large wp-image-239\" alt=\"\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-51c9c2af elementor-widget elementor-widget-text-editor\" data-id=\"51c9c2af\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t5.0\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>One of the initial requirements of effective business succession planning is to obtain an accurate value for the company. Once a credible business valuation&nbsp;is established, the proper measures to protect the company and its owner\u2019s and shareholders can be identified. Some Business Valuation Facts Most business owners have no idea what the business is actually [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2014,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,402],"tags":[],"class_list":["post-2013","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-exit-planning","category-business-planning"],"_links":{"self":[{"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/posts\/2013","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/comments?post=2013"}],"version-history":[{"count":7,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/posts\/2013\/revisions"}],"predecessor-version":[{"id":6076,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/posts\/2013\/revisions\/6076"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/media\/2014"}],"wp:attachment":[{"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/media?parent=2013"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/categories?post=2013"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/webdesign.quoteplicity.com\/keyperson\/wp-json\/wp\/v2\/tags?post=2013"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}