How is the Value of a Business Determined?
An experienced business broker Bell Gardens will be able to let you know how much your business is really worth. This is done by performing a business valuation. Thereafter you can set the most enticing asking price. Even so, it is good to note that different valuation methods bring varying results. That is why we at So-Cal Business Brokers use a combination of valuation methods to give you the most accurate results. Here are the three standards of value that our team uses.
Fair Market Value
This is the most recognized and widely accepted standard of value. This standard is used in Federal tax matters right from gift and estate taxes to income and inheritance taxes. The IRS defines fair market value as the price at which a property would change hands between a willing seller and a willing buyer where the buyer is under no compulsion to buy and the seller is not under compulsion to sell.
Our business brokers Bell Gardens have lots of experience with fair market value. What is more is that we are constantly involved in the buying and selling of businesses. If this is the standard you wish to use, So-Cal Business Brokers has you covered.
This is the standard value when dissenting stockholder’s valuation rights. With this approach, valuation is on the business’ shares. The value of the shares a shareholder has is calculated and an equivalent cash value is given. Simply put, the fair value is the amount the owner would be compensated involuntarily deprived of the property. There has to be a willing buyer and a willing seller.
The definitions of the fair value vary. Our team will make sure that you understand what it really means in your case before applying it in a business valuation. We will also enlighten you on the pros and cons.
Investment Value or Strategic Value
This is the third standard we use in business valuation. This is the value to an investor based on their investment requirements and expectations. Our business broker Bell Gardens will help breakdown the premise of value into three:
- Going concern value: This is value of a business that will grow into the future. Necessary license, operational plan, trained work force and systems & procedures are factors used to determine this.
- Liquidation value: This is the value if the assets of a business are sold in an auction.
- Replacement value: This refers to the present cost of property nearest to equivalent utility to property being valued.
Business valuation is not as straightforward. You need an experienced professional to help with this. This is where we come in. We are the best business brokerage firm in Los Angeles. Contact us now to learn more about our services.