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Define the purpose
Why is “purpose” important?
Identifying the primary purpose of a business valuation report is the cornerstone of the entire valuation process. The purpose determines the scope, methodology, and level of detail required to meet the specific needs of the situation at hand. Each purpose necessitates a tailored approach, ensuring that the valuation is not only accurate but also relevant to the decision-making process.
The importance of defining the primary purpose extends beyond conceptual clarity; it serves as the compass guiding the type of valuation report you receive, and the valuation methods selected by the appraiser.
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In practical terms, defining the primary purpose is more than a conceptual exercise; it is the first and most important step when embarking on a valuation engagement with us. As you initiate this process by clicking the green "Get Started" button on BizWorth’s website, you'll be prompted to select the primary purpose. This initial step is designed to ensure that the ensuing valuation is precisely tailored to meet your specific objectives, fostering an accurate, relevant, and actionable outcome.
Primary Purposes of a Valuation
Selling a Business
Select this option if you're selling your business. Your report will help you set a competitive asking price, negotiate favorable deals, and ensure a smooth transition for potential buyers.
Buying a Business
Opt for this purpose if you're a potential buyer. Your report will assist you in assessing the financial health and potential return on investment of the target company. Understanding the company's value will allow you to make informed decisions about the acquisition, and negotiate a fair price.
Partnership Buy-In / Out
Select this purpose if you're a part owner of a business and you or another individual is buying-in or buying-out. Your report will assess the departing or incoming partner's share, ensuring a fair exchange and maintaining financial stability for the partnership. Transparency and accuracy are crucial to avoid conflicts and facilitate a smooth transition.
Exit / Business Planning
For business owners planning their exit, choose this purpose to understand your business's worth. Your report will aid in developing effective exit plans, whether through a sale, succession, or merger.
Annual Appraisal
Perform regular appraisals to monitor your business's performance and adapt to market conditions. Your report will provide insights into financial health, growth potential, and areas that may need your attention.
Divorce
In divorce cases, reports are crucial for fair asset distribution. Your report will support a fair settlement by determining the value of your business and its impact on the overall financial picture. Depending on which state you reside in, you may need to add a personal goodwill assessment.
Legal Dispute
Select this option for legal disputes such as shareholder disagreements. Your report will provide an objective and credible basis for resolving conflicts, enabling parties to reach fair and reasonable settlements.
Bank Loan
If you're seeking a loan, choose this option. Lenders will require a thorough report to assess your business's creditworthiness and determine loan terms. Your report will help establish the collateral's value and give lenders confidence in your ability to repay. Check with your lender to see if you or your lender should order the report.
Capital Raise
For businesses seeking capital through equity financing, select this option. Your report will provide investors with assurance of your business's value and growth potential and support more successful capital-raising efforts.
Gift / Estate Planning
Choose this option for estate planning to determine the fair market value of your business for tax purposes. Your report will help support a smooth transition of assets to heirs while minimizing tax liabilities. This option can also be selected for donations of equity interest.
Start-Up Funding
If you're a start-up, select this option to attract investors and secure funding. Your report will reflect your business's potential, growth prospects, and risk factors. It is a key tool for showcasing your venture's value to potential investors.
Employee Benefit Plans
If you need to value a business for employee benefit plans, select this purpose. Your report will help employees assess the value of their benefits and help you make informed decisions about their financial future.
On average, businesses will sell at only 70% of the asking price.
Valued companies sell at closer to 90% of asking price.
Select the report type
Choosing the Right Valuation Report
Once you understand why you need a valuation report, the next step is to pick the right kind. A business valuation can be either informational or certified, depending on its primary purpose. If you're buying/selling a business or planning strategically, an informational valuation is suitable. It gives a quick estimate without the detailed examination required for certified valuations.
On the flip side, legal or estate planning requires a certified valuation. This type is meticulous and follows industry standards, ensuring the resulting formal report holds up under the intense scrutiny of legal or financial matters.
As you go through the selection process on BizWorth's website by clicking the green "Get Started" button, you'll be asked to pick a report type that matches your purpose. In some cases, more than one report will be suitable. Here’s a quick comparison.Once you understand why you need a valuation, the next step is to pick the right report. A business valuation can be either informational or certified, depending on its primary purpose. If you're buying/selling a business or planning strategically, an informational valuation is suitable. It gives a quick estimate without the detailed explanation required for certified valuations.
On the flip side, legal purposes or estate planning requires a certified appraisal as well as any valuation of a partial ownership interest (<100%) in a business. Banks are also required to obtain certified appraisals when providing an SBA-backed loan greater than $250,000. This type or report is meticulous and follows professional standards, providing a conclusion of value that holds up under the intense scrutiny of legal or potentially litigious matters as well as tax-related issues.
As you go through the selection process on BizWorth's website by clicking the green "Get Started" button, you'll be asked to pick a report type after selecting the purpose of your valuation. Only the reports that are suitable for your stated purpose will be provided as an option. In some cases, more than one report will be suitable so you can pick your preferred report. Below is a quick summary of report types:
Informational Reports
Informational valuation reports are less time-intensive to produce and provides a lower cost option to certified appraisals. They provide valuable insights to establish a market price for buying or selling a business. These reports are best suited for individuals who do not require a certified valuation and are more comfortable with an abbreviated report. All valuations are performed by a valuation professional of BizWorth’s team.
An informational valuation report provides a range for the company's value without the same level of detail and formality as a certified valuation. This report is often suitable for scenarios where a quick and less costly estimate is needed, and a formal, in-depth analysis is not essential. Here's a detailed explanation of what an informational valuation report entails and when you might need one.
Essentials Report
Prepared by a member of BizWorth’s valuation team, the Essentials Valuation Report is a streamlined 20+ page document tailored for businesses with annual revenue below $400k.
This entry-level report serves as a valuable tool in establishing an estimated market price for buying or selling a business, as well as supporting internal planning decisions.
Ideal for clients who prioritize affordability and are comfortable with limited procedures, this report offers a cost-effective solution without compromising on essential insights. With a quick turnaround time of just 5 business days, the Essentials Valuation Report is a practical choice for those seeking a quick and efficient assessment of their business's estimated market value.
Report Includes:
Valuation Summary
A concise overview of the business's estimated market value, including key findings and insights from the valuation analysis.
Asset Approach
A valuation approach that provides a valuation of the business based on the net value of the business's assets and liabilities.
SIC / NAICS Code Validation
Validates Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) codes to ensure accurate industry classification for proper benchmarking and analysis.
Market Approach
A valuation approach based on market multiples that are derived from transactions of similarly sized private companies. For this report, two valuations of the company are provided using Sales and Seller's Discretionary Earnings (SDE) multiples.
Adjusted Financials
Includes adjusted financial statements to present a clearer picture of the business's financial performance, with adjustments made for one-time expenses, non-operating items, or other factors affecting data accuracy for valuation purposes.
Available Options:
Full-Service Data Collection
Full-Service Data Collection is an optional service offered to advisors (included for owners) by BizWorth to streamline the business valuation process.
With this option, advisors authorize BizWorth to handle the entire data collection phase, including the owner’s interview and necessary financial adjustments.
Instead of advisors completing a financial spreadsheet and owner’s interview themselves, BizWorth assumes the responsibility.
This service aims to save advisors valuable time by delegating the responsibility of the data collection phase to BizWorth experts. By leveraging the Full-Service Data Collection option, advisors can ensure a more efficient and hassle-free valuation process.
This service is particularly beneficial for those who prefer a hands-off approach to data gathering and want to expedite the initiation of the valuation analysis.
Discounted Updates
Discounted updates to the report offer businesses the opportunity to receive revised or updated versions of their valuation report at a reduced cost, providing a cost-effective solution for keeping valuation information current.
This service ensures timely reassessment of the business's estimated market value in response to changing conditions, financials, and market dynamics. Clients benefit from the flexibility to request updates based on specific triggers or events, allowing them to maintain an accurate and relevant valuation.
The offering provides ongoing support, enabling businesses to stay informed about changes in their market value and make strategic decisions with the most up-to-date information.
It is a valuable option for those seeking a budget-friendly way to consistently reassess and adapt their business valuation over time.
Standard Valuation Report
Prepared by a NACVA Certified Appraiser, BizWorth's Standard Valuation Report is an informative document spanning over 35 pages, suitable for any business with annual revenue below $50 million. This analysis is crafted to provide actionable information for decisions related to buying, selling, and business planning. The report includes a valuation summary derived from market, income, and asset approaches, providing both an estimated selling price as well as the equity value of the business. Depending on the size of the business, the market approach will include up to three valuations based on the company’s sales, EBITDA, and seller discretionary earnings (SDE). The income approach will include two valuations based on the capitalization of cash flow and multi-stage growth methods. Additionally, the report offers insights through industry benchmarking against peer companies, evaluating key financial ratios such as profitability, liquidity, debt, and asset management. A new section of the report is focused on a company’s loan capacity and eligibility, featuring a sensitivity analysis on different selling prices and resulting Debt Service Coverage Ratio (DSCR).
This is BizWorth’s most popular report and serves as a valuable tool in establishing an estimated market price for buying or selling a business, as well as supporting internal planning decisions.
Ideal for clients who prioritize robust information and insightful analyses, this report offers an affordable solution. With a quick turnaround time of just 5 business days, the Standard Valuation Report is the most popular choice for those seeking a quick and insightful assessment of their business's estimated selling price and equity value.
Report Includes:
Valuation Summary
A concise overview of the business's estimated selling price and equity value, including key findings and insights from the valuation analysis.
Capitalization of Cash Flow Method
An Income Approach valuation method that calculates the business's value based on its expected future cash flows. It involves dividing the expected annual cash flow by the capitalization rate (discount rate minus the expected growth rate) to arrive at the valuation.
Market Approach
A valuation approach based on market multiples that are derived from transactions of similarly sized private companies.
Owner's Compensation Analysis
Examination of the owner's compensation to ensure it aligns with industry standards and is appropriately reflected in the business's valuation.
Asset Approach
A valuation approach that provides a valuation of the business based on the net value of the business's assets and liabilities.
SIC / NAICS Code Validation
Verification of Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) codes to ensure accurate industry classification for benchmarking.
Adjusted Financials
Includes adjusted financial statements to present a clearer picture of the business's financial performance, with adjustments made for one-time expenses, non-operating items, or other factors affecting data accuracy for valuation purposes.
Income Approach
A valuation approach that focuses on the business's future income-generating capabilities.
Multi-stage Growth Method
An Income Approach valuation method that considers different growth rates over distinct periods to estimate the value of an investment or business. It acknowledges that the growth of cash flows may vary across stages, allowing for a more nuanced valuation by incorporating different growth assumptions for each stage of the business's life cycle.
Sales, SDE, & EBITDA Multiples
A Market Approach valuation method known as the comparable transaction method assesses the value of the business by comparing it to the prices paid for similar entities in recent transactions. This method relies on analyzing relevant financial and operational metrics of comparable transactions to determine the value of the business using multiples. Depending on the size of the business and the comparable transactions found, the business will be valued using up to three different multiples: Sales, Seller's Discretionary Earnings (SDE), and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
List of Comparable Transactions
Identification and analysis of similar transactions in the market to provide context for the business's valuation.
Industry Benchmarking
Comparison of the business's financial performance against similarly sized industry peers to assess relative strengths and weaknesses.
State Tax Verification
Verification of state-specific tax considerations and implications, ensuring accuracy in the valuation process.
Available Options:
Full-Service Data Collection
Full-Service Data Collection is an optional service offered to advisors (included for owners) by BizWorth to streamline the business valuation process. With this option, advisors authorize BizWorth to handle the entire data collection phase, including the owner’s interview and necessary financial adjustments. Instead of advisors completing a financial spreadsheet and owner’s interview themselves, BizWorth assumes the responsibility.
This service aims to save advisors valuable time by delegating the responsibility of the data collection phase to BizWorth experts. By leveraging the Full-Service Data Collection option, advisors can ensure a more efficient and hassle-free valuation process. This service is particularly beneficial for those who prefer a hands-off approach to data gathering and want to expedite the initiation of the valuation analysis.
Discounted Updates
Discounted updates to the report offer businesses the opportunity to receive revised or updated versions of their valuation report at a reduced cost, providing a cost-effective solution for keeping valuation information current.
This service ensures timely reassessment of the business's estimated market value in response to changing conditions, financials, and market dynamics. Clients benefit from the flexibility to request updates based on specific triggers or events, allowing them to maintain an accurate and relevant valuation.
The offering provides ongoing support, enabling businesses to stay informed about changes in their market value and make strategic decisions with the most up-to-date information. It is a valuable option for those seeking a budget-friendly way to consistently reassess and adapt their business valuation over time.
Certified Reports
Certified reports, meticulously prepared by experts with certifications such as those from NACVA, offer businesses a highly credible and through assessment of fair market value. These reports adhere to rigorous professional standards, making them crucial in scenarios where scrutiny over the value is expected or detailed support and explanation are essential.
Serving as valuable tools for financial decision-making, certified reports transparently present factors influencing a business's value and facilitate smoother transactions, particularly in negotiations.
These reports provide a defensible conclusion of value, ideal for situations with a high level of interest and scrutiny. The conclusion of value is drawn from the most appropriate valuation approaches and methods, ensuring a well-documented and objective assessment of the business's worth.
Additionally, certified quality of earnings reports further enhance the reliability of financial information, ensuring a comprehensive and accurate representation of a business's financial performance and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
Certified Summary Report
Our meticulously crafted Certified Summary Report, conducted by a BizWorth NACVA Certified Appraiser, spans over 65 pages. Tailored for various scenarios such as business acquisitions, divestitures, IRS submissions, partner transactions, disputes, litigation, and bank loan applications, this comprehensive report adheres to the highest professional standards, making it an ideal choice for presenting to third parties.
Geared towards providing clarity for third-party readers, the certified summary report offers a transparent understanding of a company's valuation. It is a credible and thorough assessment crafted to meet stringent requirements.
Additionally, this report is versatile, allowing us to value either 100% of the business or a percentage less than 100%. You can expect the report to be ready within 4 weeks, and rush orders are available for those seeking expedited delivery.
Report Includes:
Valuation Summary
This concise overview captures the conclusion of value for the business's ownership interests, presenting key findings from the comprehensive valuation analysis.
Market Approach
A valuation approach based on market multiples that are derived from transactions of similarly sized private companies.
Owner's Interview
An interview conducted with the business owner and/or key management to gather relevant information for the valuation process.
Discount Rate Calculation & Explanation
Determination and explanation of the discount rate applied in the income approach valuation methods.
List of Comparable Transactions
Identification and analysis of similar transactions in the market to provide context for the business's valuation.
Adherence to NACVA Standards
Indicates BizWorth’s valuation process follows the standards set by the National Association of Certified Valuators and Analysts for credibility and reliability.
Business Nature & History Summary
A brief overview of the business's nature and history, providing context for the valuation.
Financial Analysis
Examination of the business's financial statements to assess its performance and financial health.
State Tax Verification
Verification of state-specific tax considerations, ensuring accuracy in the valuation process.
Report Review with Certified Appraiser
An opportunity for a review of the valuation report with the certified appraiser to ensure accuracy and understanding.
Income Approach
A valuation approach that focuses on the business's future income-generating capabilities.
Asset Approach
A valuation approach that provides a valuation of the business based on the net value of the business's assets and liabilities.
Owner's Compensation Analysis
Examination of the owner's compensation to ensure it aligns with industry standards and is appropriately reflected in the valuation.
Sales, SDE, & EBITDA Multiples
A Market Approach valuation method known as the comparable transaction method assesses the value of the business by comparing it to the prices paid for similar entities in recent transactions. This method relies on analyzing relevant financial and operational metrics of comparable transactions to determine the value of the business using multiples. Depending on the size of the business and the comparable transactions found, the business will be valued using up to three different multiples: Sales, Seller's Discretionary Earnings (SDE), and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
SIC / NAICS Code Validation
Examination of the business's financial statements to assess its performance and financial health.
Adherence to USPAP Standards
Ensuring compliance with the Uniform Standards of Professional Appraisal Practice for credibility and ethical standards in valuation.
Economy & Industry Overview
Consideration of economic and industry factors influencing the business's value.
Industry Benchmarking
Comparison of the business's financial performance against industry peers to assess relative strengths and weaknesses.
Prepared by Certified Appraiser
Confirmation that the valuation report is crafted by a certified appraiser, ensuring expertise and credibility.
Available Options:
Financial Transcription
Ensure a smooth start to your valuation with BizWorth by providing financials in Microsoft Excel (.xls) format. If your financial statements aren't in this format, choose the option to have BizWorth convert your annual financial statements (up to the last 5 years) into Microsoft Excel (.xls) for you.
Expedited Delivery
Need your report sooner than the standard turnaround time? Opt for our 1, 2, or 3-week guaranteed delivery options for expedited service.
Rights to Named Expert
Tailored for litigation cases, this option grants clients the right to identify a BizWorth valuation professional as a named expert in court documents.
Discounted Updates
Keep your report current with deep discounts on updates. Choose the number and frequency of updates you need. Note that the price for discounted updates is a one-time offer payable at checkout and is non-refundable.
Prepaid Retainer
Ideal for litigation cases, the prepaid retainer authorizes the appraiser to provide litigation support services. This option accommodates cases where the cost of the appraisal and litigation support cannot be accurately determined in advance. Any remaining balance at the assignment's conclusion will be applied to the final invoice.
SBA Compliant Report
The SBA Compliant Appraisal Report, meticulously crafted by a NACVA Certified Appraiser, is comprised of two reports (Part A and Part B) designed for use throughout the selling process.
Part A: Pre-Qualified Valuation Report
The initial report, the Pre-Qualified Valuation Report, serves a dual purpose: first, it is utilized by participating lenders to offer business owners a pre-qualified loan amount for creditworthy buyers; it provides valuable information to buyers, advisors, and lenders alike. This report facilitates the establishment of a credible asking price, attracts a more qualified pool of buyers, and accelerates negotiation and due diligence processes. With a swift turnaround of 1-5 business days, the report significantly enhances the overall efficiency of the selling process.
Part B: SBA Compliant Certified Summary Report
Tailored for securing qualified financing for business acquisitions, this component is accepted by participating banks and adheres to the Small Business Administration’s loan requirements. The report is meticulously prepared, meeting the rigorous standards outlined in USPAP and SBA SOP 50 10 6. It is specifically tailored for scenarios where the financed amount (including various financing types) minus the appraised value of real estate and/or equipment exceeds $250,000.
Additionally, it's important to note that BizWorth's SBA Compliant Valuation Report values only 100% of the business, providing a reliable foundation for buying or selling endeavors.
Part A: Pre-Qualified Valuation Report
Valuation Summary
A concise overview of the business's estimated selling price and equity value, including key findings and insights from the valuation analysis.
Capitalization of Cash Flow Method
An Income Approach valuation method that calculates the business's value based on its expected future cash flows. It involves dividing the expected annual cash flow by the capitalization rate (discount rate minus the expected growth rate) to arrive at the valuation.
Market Approach
A valuation approach based on market multiples that are derived from transactions of similarly sized private companies.
Financial Analysis
Examination of the business's financial statements to assess its performance and financial health.
List of Comparable Transactions
Identification and analysis of similar transactions in the market to provide context for the business's valuation.
Industry Benchmarking
Comparison of the business's financial performance against similarly sized industry peers to assess relative strengths and weaknesses.
State Tax Verification
Verification of state-specific tax considerations and implications, ensuring accuracy in the valuation process.
Income Approach
A valuation approach that focuses on the business's future income-generating capabilities.
Multi-stage Growth Method
An Income Approach valuation method that considers different growth rates over distinct periods to estimate the value of an investment or business. It acknowledges that the growth of cash flows may vary across stages, allowing for a more nuanced valuation by incorporating different growth assumptions for each stage of the business's life cycle.
Sales, SDE, & EBITDA Multiples
A Market Approach valuation method known as the comparable transaction method assesses the value of the business by comparing it to the prices paid for similar entities in recent transactions. This method relies on analyzing relevant financial and operational metrics of comparable transactions to determine the value of the business using multiples. Depending on the size of the business and the comparable transactions found, the business will be valued using up to three different multiples: Sales, Seller's Discretionary Earnings (SDE), and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).
Owner's Compensation Analysis
Examination of the owner's compensation to ensure it aligns with industry standards and is appropriately reflected in the business's valuation.
Asset Approach
A valuation approach that provides a valuation of the business based on the net value of the business's assets and liabilities.
SIC / NAICS Code Validation
Verification of Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) codes to ensure accurate industry classification for benchmarking.
Adjusted Financials
Includes adjusted financial statements to present a clearer picture of the business's financial performance, with adjustments made for one-time expenses, non-operating items, or other factors affecting data accuracy for valuation purposes.
Part B: SBA Compliant Certified Summary Report
In addition to the benefits listed for Part A, the Part B report will also include:
Adherence to NACVA Standards
Indicates BizWorth’s valuation process follows the standards set by the National Association of Certified Valuators and Analysts for credibility and reliability.
Business Nature & History Summary
A brief overview of the business's nature and history, providing context for the valuation.
Prepared by Certified Appraiser
Confirmation that the valuation report is crafted by a certified appraiser, ensuring expertise and credibility.
Adherence to USPAP Standards
Ensuring compliance with the Uniform Standards of Professional Appraisal Practice for credibility and ethical standards in valuation.
Economy & Industry Overview
Consideration of economic and industry factors influencing the business's value.
Report Review with Certified Appraiser
An opportunity for a review of the valuation report with the certified appraiser to ensure accuracy and understanding.
Certified Detailed Report
BizWorth's Certified Detailed Report, an extensive document exceeding 100 pages, is meticulously crafted to provide a comprehensive understanding of the data, reasoning, and analyses forming the certified appraiser's conclusion of value. Going beyond traditional appraisals for ongoing operating companies, we dedicate significant time engaging with management to comprehend their proformas, especially crucial for valuing businesses planning a capital raise where accelerated growth is anticipated.
This unique appraisal stands out for its in-depth written analysis covering the company's nature and history, industry and economic landscapes, and financials, leading to a well-informed and credible conclusion of value. Tailored specifically for start-ups and companies planning capital raises, it offers a nuanced exploration of the company's background, evolution, and growth potential.
Notably, our analysis extends beyond the company to include a meticulous examination of the industry and economic factors influencing its valuation. We employ hard-to-find and expensive data, tracking both pre- and post-money valuations of other companies in their development and life cycle. This comparative approach enriches the appraisal with insights into how the company's valuation aligns with relevant industry benchmarks. Overall, this appraisal serves as an invaluable tool for businesses in capital raise scenarios, offering a deep and credible foundation for strategic decision-making and investor communication and negotiation.
With a turnaround time of 6 weeks, the Certified Detailed Report strikes a balance between thoroughness and efficiency. For those with tighter timelines, rush orders are available.
Report Includes:
Valuation Summary
This concise overview captures the conclusion of value for the business's ownership interests, presenting key findings from the comprehensive valuation analysis.
Market Approach
A valuation approach based on market multiples that are derived from transactions of similarly sized private companies or public companies.
Owner's Interview
An interview conducted with the business owner and/or key management to gather relevant information for the valuation process.
Discount Rate Calculation & Explanation
Determination and explanation of the discount rate applied in the income approach valuation methods.
SIC / NAICS Code Validation
Examination of the business's financial statements to assess its performance and financial health.
Business Nature & History Summary
Offers valuable insights into the business's nature and history, including its services and products. Additionally, it provides a contextual overview of the management team, enhancing the understanding that underpins the valuation analysis.
Financial Analysis
Examination of the business's financial statements to assess its performance and financial health.
State Tax Verification
Verification of state-specific tax considerations, ensuring accuracy in the valuation process.
State Tax Verification
Verification of state-specific tax considerations, ensuring accuracy in the valuation process.
Report Review with Certified Appraiser
An opportunity for a review of the valuation report with the certified appraiser to ensure accuracy and understanding.
Income Approach
A valuation approach that focuses on the business's future income-generating capabilities. The most common valuation methods we routinely choose from include: discounted cash flow (DCF) method, capitalization of cash flow method, or multi-stage growth method.
Asset Approach
A valuation approach that provides a valuation of the business based on the net value of the business's assets and liabilities.
Owner's Compensation Analysis
Examination of the owner's compensation to ensure it aligns with industry standards and is appropriately reflected in the valuation.
List of Comparable Capital Raise Transactions
Identification and analysis of similar companies who have undergone capital raise initiatives providing the pre- and post-money valuations segmented by the stage of maturity (i.e., start-up, generating revenue, generating revenue and profitable, etc.).
Adherence to NACVA Standards
Indicates BizWorth’s valuation process follows the standards set by the National Association of Certified Valuators and Analysts for credibility and reliability.
Economy & Industry Overview
Consideration of economic and industry factors influencing the business's value.
Industry Benchmarking
Comparison of the business's financial performance against industry peers to assess relative strengths and weaknesses.
Prepared by Certified Appraiser
Confirmation that the valuation report is crafted by a certified appraiser, ensuring expertise and credibility.
Gather required information
The process you can expect
Here's an easy-to-understand explanation of the process to order and provide the information needed to obtain a business valuation report:
Step 1: Click the Green "Get Started“ Button
Initiate the process by clicking "Get Started" and provide essential details about yourself and the company. This includes specifying the reason for the report, number of legal entities, annual sales, and property ownership.
Step 2: Select and Customize Your Report
After entering company details, our system matches your needs with suitable reports. Choose your desired report, customize it if needed, and add it to your cart. Review additional recommendations, enhance your report options, and proceed to checkout. Pay securely with major credit cards, Affirm, or ACH.
Step 3: Provide Additional Information
On the "Information We Need from You" page, submit the required details about the company. Subsequently, you’ll receive an email inviting you to the Data Collection Portal.
Step 4: Accept Invite to Data Collection Portal
Check your email for an invitation from officeadmin@datacollectionportal.com to the secure Data Collection Portal. Accept the invite to create your account.
Step 5: Complete Portal Intake Form
Navigate through the portal, filling out required forms and carefully following instructions. Save your progress if needed. Once finished, click "I've finished" to notify BizWorth that your valuation application is ready to commence. This initiates the appraisal, starting the countdown for delivery within the specified turnaround time. Check your email for updates.
This process is designed to be simple, efficient, and tailored to your business valuation needs.
Data you’ll need to collect
To kick off the business valuation process, you’ll start by gathering the necessary business and financial data needed for BizWorth to prepare a comprehensive and accurate valuation report.
You’ll start with the Intake Form on the BizWorth Data Collection Portal which was designed for a seamless and secure data gathering experience. This platform ensures the confidentiality and integrity of your business information, offering a secure environment to collect essential data.
The valuation process will initiate only after you have completed and submitted the application through BizWorth's Data Collection Portal. So you can be prepared to complete the Intake Form, select the report below to see what information you’ll need to provide.
Essentials Valuation Report
Complete Intake Form
In this initial step, we’ll start by collecting information about the company’s owners, business details and attributes about the business.
Company Owner Information
- Company Owner(s) Full Name(s)
- Company Owner(s) Title(s) i.e. President, Vice-President, Owner, etc.
- Company’s Primary Address
Business Details
- Legal Business Name i.e. ABC, LLC
- DBA, if applicable
- Company’s NAICS code(s) – you’re NAICS code(s) can be found on your tax return. An accurate NAICS code is critical to the valuation. We use this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/
- Company website, if applicable
- Entity type i.e. LLC, Partnership, C-Corp, Non-profit, etc.
Company Attributes
- Key Attributes – Provide any information about key strengths or attributes of the business that we should know about that may positively impact the value of the business such as reoccurring revenue sources, long-term contracts with vendors/customers/, differentiated or A-rated customers, hard-to-replicate services or products, long-standing company history.
- Key Weaknesses – Provide any information that may negatively impact the business such as high employee turnover, employee or inventory shortages, etc.
Standard Valuation Report
Complete Intake Form
In this initial step, we’ll start by collecting information about the company’s owners, business details and attributes about the business.
Company Owner Information
- Company Owner(s) Full Name(s)
- Company Owner(s) Title(s) i.e. President, Vice-President, Owner, etc.
- Company’s Primary Address
Business Details
- Legal Business Name i.e. ABC, LLC
- DBA, if applicable
- Company’s NAICS code(s) – you’re NAICS code(s) can be found on your tax return. An accurate NAICS code is critical to the valuation. We use this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/
- Company website, if applicable
- Entity type i.e. LLC, Partnership, C-Corp, Non-profit, etc.
Transaction History
- Transaction History: Has the business been previously appraised? If yes, when was the appraisal, what was the purpose and what the valuation amount?
- Has the business received any written or oral offers in the last five years? If yes, Describe all written or oral offers received for the company in the last five years. Who were shares sold to? What was the price of shares sold? What was the percentage (%) of shares sold? What were the restrictions, if any? What was the reason for the sale? Terms and type.
Company Property
- Does the company own the land and/or building(s) it operates from? If yes, what is the value of the land and/or building(s) on your balance sheet? What is the total debt of the land and/or building(s) on your balance sheet? What would the market-based monthly rent be for your land and/or building(s) if you were leasing from a third-party?
- Does the company lease its operating space from a related party? Examples of a related party include owners, relatives, friends, or separate entities owned by owners, relatives, or friends. If yes, What is the company's monthly rent expense? What market-based monthly rent would be charged to a new owner if the land and/or building(s) is leased to them?
Company Forecast
- What do you think the business is worth?
- What is the forecast for annual revenues this coming year?
Company Attributes
- Key Attributes – Provide any information about key strengths or attributes of the business that we should know about that would positively impact the value of the business such as reoccurring revenue sources, long-term contracts with vendors/customers/, differentiated or A-rated customers, hard-to-replicate services or products, long-standing company history.
- Key Weaknesses – Provide any information that would negatively impact the value of the business such as high employee turnover, employee or inventory shortages, etc.
Certified Summary Valuation Report
Complete Intake Form
In this initial step, we’ll start by collecting information about the company’s owners, business details and attributes about the business.
Primary Contact Information
- Primary Contact Full Name
- Primary Contact Title i.e. President, Vice-President, Owner, etc.
- Primary Contact Email and Postal Address
Business Details
- Legal Business Name i.e. ABC, LLC
- DBA, if applicable
- Company’s NAICS code(s) – you’re NAICS code(s) can be found on your tax return. An accurate NAICS code is critical to the valuation. We use this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/
- Company website, if applicable
- Entity type i.e. LLC, Partnership, C-Corp, Non-profit, etc.
Transaction History
- Transaction History: Has the business been previously appraised? If yes, when was the appraisal, what was the purpose and what the valuation amount?
- Has the business received any written or oral offers in the last five years? If yes, Describe all written or oral offers received for the company in the last five years. Who were shares sold to? What was the price of shares sold? What was the percentage (%) of shares sold? What were the restrictions, if any? What was the reason for the sale? Terms and type.
Company Background
- Provide a brief history / background of the company and why it was started.
- List the major historical events of the company.
- What is the current number of employees and the current number of contractors?
- What is the principal activity of the company?
Ownership
- Date and State of formation
- Partner / shareholder name, title and % ownership
- Partner /shareholder education, background and compensation
- Describe the subject ownership to be valued. Provide details about the ownership structure being assessed for valuation. For instance, if it's a controlling interest, clarify whether decision-making authority is held. Specify if there's eligibility to receive distributions and if day-to-day operational decisions are made by the ownership in question.
- Describe how the ownership interests of the other owners, if any affect the value of the practice. Explain how the ownership of other individuals, if there are any, influences the value of the business or practice. Share information about these other owners and how their ownership might affect the overall value. Consider factors like whether the business is owned by multiple people, the extent of their control over distributions and day-to-day decisions, and any restrictions on the ability to sell their ownership interests.
Related Party Transactions
- List all known related parties (that is, subsidiaries, affiliates, or relatives) that the company does business with. Examples include: The company employing friends or family of the owners. Renting space from an affiliate company or family member.
- List each location maintained by the company and the primary activity at each, that is, executive office, plant, sales office, etc.
Products & Services
- Describe your customers.
- Who are your top 5 customers and the annual revenues from each last year?
- Do you expect any changes to your top five customers and their associated revenues?
- Describe your market area or region.
- Describe your marketing and advertising strategy.
- Is your business cyclical or seasonal.
Competition and Differentiation
- List the company's major competitors and provide their websites, if applicable.
- How does the company compare in size and market share to its competitors?
- How easy is it to enter the industry? In your opinion, what are the barriers to entry?
- Describe the company's product/service differentiation from competition.
- List the company's competitive strengths.
- List the company's weaknesses.
Management
- Who are the key management members? Provide name and title.
- What are their job responsibilities?
- What is their education and background?
- What is their compensation?
- Discuss any turnover in key members of management over the last five years.
- Describe employee benefits (insurance, stock options, profit sharing, etc.)
- Describe any employment contracts in place.
Operations and Facilities
- What is the capacity relative to the current operating levels? Are sales constrained by current capacity?
- How many shifts and days per week does the company operate?
- Is there excess capacity or excessive fixed overhead costs?
- Are buildings and/or machinery owned or leased?
- Is there any inefficient or obsolete equipment?
- What is the likelihood of major repairs?
- Does the company have any foreign operations?
- Discuss the effects of any existing or potential federal or state regulation or subsidies on the company's operations.
Industry and Financial Information
- List the company’s NAICS codes. Your NAICS code can be found on your tax return. An accurate NAICS code is critical to the valuation. We uses this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/.
- How is the business entity taxed? (Examples: Owner’s tax return, Partnership, S Corporation, Nonprofit, etc.)
- What is the fiscal year-end of the company?
- Are ongoing capital expenditure (i.e. major expenses) levels going to remain consistent or will there be a material increase or decrease?
- How much of the spend represents expansion versus replacement of existing assets?
- Describe the sources of credit and how they were used.
- Discuss any special stock rights, warrants, options, etc.
- Discuss the company's dividend history, if applicable:
- Is there any pending or threatened litigation?
- Who are your top 5 vendors?
- Identify primary discretionary expenses (including perks to company owners), total amounts of each and where they can be found on the income statement.
- Identify non-operating assets & liabilities (examples include cash portion of life insurance, vacant land, etc.).
- Are current appraisals of tangible assets available?
- Is the company carrying assets not in use?
- List and describe any leasing activities.
Certified SBA Compliant Appraisal
Complete Intake Form
In this initial step, we’ll start by collecting information about the company’s owners, business details and attributes about the business.
Primary Contact Information
- Primary Contact Full Name
- Primary Contact Title i.e. President, Vice-President, Owner, etc.
- Primary Contact Email and Postal Address
Business Details
- Legal Business Name i.e. ABC, LLC
- DBA, if applicable
- Company’s NAICS code(s) – you’re NAICS code(s) can be found on your tax return. An accurate NAICS code is critical to the valuation. We use this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/
- Company website, if applicable
- Entity type i.e. LLC, Partnership, C-Corp, Non-profit, etc.
Transaction History
- Transaction History: Has the business been previously appraised? If yes, when was the appraisal, what was the purpose and what the valuation amount?
- Has the business received any written or oral offers in the last five years? If yes, Describe all written or oral offers received for the company in the last five years. Who were shares sold to? What was the price of shares sold? What was the percentage (%) of shares sold? What were the restrictions, if any? What was the reason for the sale? Terms and type.
Company Background
- Provide a brief history / background of the company and why it was started.
- List the major historical events of the company.
- What is the current number of employees and the current number of contractors?
- What is the principal activity of the company?
Ownership
- Date and State of formation
- Partner / shareholder name, title and % ownership
- Partner /shareholder compensation
Related Party Transactions
- List all known related parties (that is, subsidiaries, affiliates, or relatives) that the company does business with. Examples include: The company employing friends or family of the owners. Renting space from an affiliate company or family member.
- List each location maintained by the company and the primary activity at each, that is, executive office, plant, sales office, etc.
Products & Services
- Describe your customers.
- Who are your top 5 customers and the annual revenues from each last year?
- Do you expect any changes to your top five customers and their associated revenues?
- Describe your market area or region.
- Describe your marketing and advertising strategy.
- Is your business cyclical or seasonal.
Competition and Differentiation
- List the company's major competitors and provide their websites, if applicable.
- How does the company compare in size and market share to its competitors?
- How easy is it to enter the industry? In your opinion, what are the barriers to entry?
- Describe the company's product/service differentiation from competition.
- List the company's competitive strengths.
- List the company's weaknesses.
Management
- Who are the key management members? Provide name and title.
- What are their job responsibilities?
- What is their education and background?
- What is their compensation?
- Discuss any turnover in key members of management over the last five years.
- Describe employee benefits (insurance, stock options, profit sharing, etc.)
- Describe any employment contracts in place.
Operations and Facilities
- What is the capacity relative to the current operating levels? Are sales constrained by current capacity?
- How many shifts and days per week does the company operate?
- Is there excess capacity or excessive fixed overhead costs?
- Are buildings and/or machinery owned or leased?
- Is there any inefficient or obsolete equipment?
- What is the likelihood of major repairs?
- Does the company have any foreign operations?
- Discuss the effects of any existing or potential federal or state regulation or subsidies on the company's operations.
Industry and Financial Information
- List the company’s NAICS codes. Your NAICS code can be found on your tax return. An accurate NAICS code is critical to the valuation. We uses this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/.
- How is the business entity taxed? (Examples: Owner’s tax return, Partnership, S Corporation, Nonprofit, etc.)
- What is the fiscal year-end of the company?
- Are ongoing capital expenditure (i.e. major expenses) levels going to remain consistent or will there be a material increase or decrease?
- How much of the spend represents expansion versus replacement of existing assets?
- Have there been any short-term and/or long-term sources of credit used in the last five years?
- Describe the sources of credit and how they were used.
- Discuss any special stock rights, warrants, options, etc.
- Discuss the company's dividend history, if applicable:
- Is there any pending or threatened litigation?
- Who are your top 5 vendors?
- Identify primary discretionary expenses (including perks to company owners), total amounts of each and where they can be found on the income statement.
- Identify non-operating assets & liabilities (examples include cash portion of life insurance, vacant land, etc.).
- Are current appraisals of tangible assets available?
- Is the company carrying assets not in use?
- List and describe any leasing activities.
Certified Detailed Valuation Report
Complete Intake Form
In this initial step, we’ll start by collecting information about the company’s owners, business details and attributes about the business.
Primary Contact Information
- Primary Contact Full Name
- Primary Contact Title i.e. President, Vice-President, Owner, etc.
- Primary Contact Email and Postal Address
Business Details
- Legal Business Name i.e. ABC, LLC
- DBA, if applicable
- Company’s NAICS code(s) – you’re NAICS code(s) can be found on your tax return. An accurate NAICS code is critical to the valuation. We use this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/
- Company website, if applicable
- Entity type i.e. LLC, Partnership, C-Corp, Non-profit, etc.
Transaction History
- Transaction History: Has the business been previously appraised? If yes, when was the appraisal, what was the purpose and what the valuation amount?
- Has the business received any written or oral offers or equity investments in the last five years? If yes, describe all written or oral offers as well as equity investments received for the company in the last five years. Who were shares sold to? What was the price of shares sold? What was the percentage (%) of shares sold? What were the restrictions, if any? What was the reason for the sale? Terms and type.
Company Background
- Provide a brief history / background of the company and why it was started.
- List the major historical events of the company.
- What is the current number of employees and the current number of contractors?
- What is the principal activity of the company?
Ownership
- Date and State of formation
- Partner / shareholder name, title and % ownership
- Partner /shareholder education, background and compensation
- Describe the subject ownership to be valued. Provide details about the ownership structure being assessed for valuation. For instance, if it's a controlling interest, clarify whether decision-making authority is held. Specify if there's eligibility to receive distributions and if day-to-day operational decisions are made by the ownership in question.
- Describe how the ownership interests of the other owners, if any affect the value of the practice. Explain how the ownership of other individuals, if there are any, influences the value of the business or practice. Share information about these other owners and how their ownership might affect the overall value. Consider factors like whether the business is owned by multiple people, the extent of their control over distributions and day-to-day decisions, and any restrictions on the ability to sell their ownership interests.
Related Party Transactions
- List all known related parties (that is, subsidiaries, affiliates, or relatives) that the company does business with. Examples include: The company employing friends or family of the owners. Renting space from an affiliate company or family member.
- List each location maintained by the company and the primary activity ateach, that is, executive office, plant, sales office, etc.
Products & Services
- Describe your customers. If you don’t have any customers, describe your target customers.
- Who are your top 5 customers and the annual revenues from each last year?
- Do you expect any changes to your top five customers and their associated revenues?
- Describe your market area or region.
- Describe your marketing and advertising strategy.
- Is your business cyclical or seasonal.
Competition and Differentiation
- List the company's major competitors and provide their websites, if applicable.
- How does the company compare in size and market share to its competitors?
- How easy is it to enter the industry? In your opinion, what are the barriers to entry?
- Describe the company's product/service differentiation from competition.
- List the company's competitive strengths.
- List the company's weaknesses.
Management
- Who are the key management members? Provide name and title.
- What are their job responsibilities?
- What is their education and background?
- What is their compensation?
- Discuss any turnover in key members of management over the last five years.
- Describe employee benefits (insurance, stock options, profit sharing, etc.)
- Describe any employment contracts in place.
- Does the company have a board of directors? List the board members if applicable.
Operations and Facilities
- What is the capacity relative to the current operating levels? Are sales constrained by current capacity?
- How many shifts and days per week does the company operate?
- Is there excess capacity or excessive fixed overhead costs?
- Are buildings and/or machinery owned or leased?
- Is there any inefficient or obsolete equipment?
- What is the likelihood of major repairs?
- Does the company have any foreign operations?
- Does the company have any problems with any foreign governments?
- Discuss the effects of any existing or potential federal or state regulation or subsidies on the company's operations.
Industry and Financial Information
- List the company’s NAICS codes. Your NAICS code can be found on your tax return. An accurate NAICS code is critical to the valuation. We uses this code to conduct industry benchmarking as well as find comparable transactions. You can confirm the accuracy of your code on the NAICS Association website: www.naics.com/search/.
- How is the business entity taxed? (Examples: Owner’s tax return, Partnership, S Corporation, Nonprofit, etc.)
- What is the fiscal year-end of the company?
- Are budgets or forecasts prepared? If yes, please provide.
- Are there any future planned capital expenditures (i.e. major expenses)?
- How much of the spend represents expansion versus replacement of existing assets?
- Describe the sources of credit and how they were used.
- Discuss any special stock rights, warrants, options, etc.
- Discuss the company's dividend history, if applicable:
- Is there any pending or threatened litigation?
- Who are your top 5 vendors?
- Identify primary discretionary expenses (including perks to company owners), total amounts of each and where they can be found on the income statement.
- Identify non-operating assets & liabilities (examples include cash portion of life insurance, vacant land, etc.).
- Are current appraisals of tangible assets available?
- Is the company carrying assets not in use?
- List and describe any leasing activities.
- Describe relevant past and expected future trends for the company, such as growth pattern, expansion or cutbacks of business segments, possible spinoffs, mergers and acquisitions.
- Describe the company's future expectations, goals, objectives, and long-range plans in the areas of (1) projects and services, (2) marketing and customers, and (3) R&D and technology.
Additional Information
- Provide any available financial forecasts, and/or proformas.
- Provide any pitchbooks, presentations about the business or growth plans.
- List any comparable companies similar in the industry that have gone through capital raising.
Prepare & Upload financial statements
Self-service or full-service?
BizWorth offers two service options for informational reports: full-service and self-service. BizWorth offers only full-service for Certified Summary Reports
Full-Service (most common): included in all valuations ordered by business owners and is an optional upgrade offered to members of BizWorth’s Valuation Partner Program ordering informational reports to streamline their process. Full service is included in all Certified Summary Reports.
Self-Service: available for only informational reports and is available only to current members of BizWorth’s Valuation Partner Program who have specialized training, knowledge, experience and time to complete the financials intake spreadsheet. With this option, the member takes full responsibility for providing accurate financial information and adjustments.
Informational Valuation Reports (Essentials & Standard):
The financial information required for informational reports – Essentials and Standard - are identical. You can use the guide below to prepare your financial information for upload into BizWorth’s secure data collection portal.
Full-Service Option
- Upload 3 Years of Financial Statements (or Tax Returns). You will choose to upload either financial statements (Profit & Loss Statement and Balance Sheet) or tax returns of the business for the last three full years. Tax returns are usually preferred if you are buying or selling a business; however, financial statements are usually preferred for strategic planning purposes. Consult with your advisor, lender, or CPA regarding their preference.
- Upload Year-to-Date Financial Statements. You will also be asked to upload a year-to-date financial statement through the valuation date. Be sure the year-to-date financials are through the same valuation date. It is preferred to use a month-end, quarter-end, or year-end date when possible.
- Upload Trailing 12 Months Profit & Loss Statement (optional). If your business is seasonal, then we highly recommend uploading a Trailing 12-Month Profit & Loss Statement. This will allow your valuation expert to better understand how to forecast revenue and expenses for the remining months of the current year.
To ensure a swift turnaround, it's recommended to provide financial statements in Excel format with the Profit & Loss on one worksheet with the years in column format. The balance sheet will be on a separate worksheet with the years also in column format.
Self-Service Option
The Self-Service option is available only to members of BizWorth's Valuation Partner Program when ordering a report. It places the financial data collection process in the hands of knowledgeable and experienced member with specialized training.
In the Data Collection Portal provided to members, she/he will download and complete the Financial Intake Spreadsheet in lieu of uploading tax returns or financial statements. The Financial Intake Spreadsheet can be accessed through the information "i" icon at the top of the page. Members can also locate the spreadsheet under "Files shared with you," labeled "Financial Intake Spreadsheet." Once completed, be sure to re-upload the file in Excel format using the "Upload" button below for a seamless continuation of the valuation process. Refer to the FAQs in this section for a list of the information to be collected in the Financial Intake Spreadsheet.
Certified Summary Reports
You can use the guide below to prepare your financial information for upload into BizWorth’s secure data collection portal.
- Upload 5 Years of Financial Statements (or Tax Returns). You will choose to upload either financial statements (Profit & Loss Statement and Balance Sheet) or tax returns of the business for the last five full years. Financial statements are usually preferred, but you may also upload tax returns. Consult with your advisor, lender, or CPA regarding their preference.
- Upload Year-to-Date Financial Statements. You will also be asked to upload a year-to-date financial statement through the valuation date. Be sure the year-to-date financials are through the same valuation date. It is preferred to use a valuation date at month-end, quarter-end, or year-end date when possible.
- Upload Trailing 12 Months Profit & Loss Statement (optional). If your business is seasonal, then we highly recommend uploading a Trailing 12-Month Profit & Loss Statement. This will allow your valuation expert to better understand how to forecast revenue and expenses for the remining months of the current year.
To avoid a $600 transcription fee, provide all financial statements in Excel format with the Profit & Loss on one worksheet with the years in column format, including the year-to-date financials. The balance sheet will be on a separate worksheet with the years also in column format.
Certified Detailed Reports
In addition to the data requested for a Certified Summary Report (provided above), you will also be asked to provide a detailed budget and/or forecast for future years. Ideally, we are looking for as much detail as possible. We will review these forecasts with you during the valuation process so be ready to explain your projections.
We also understand that many companies raising capital are either pre-revenue or pre-profitability so you may not have five years of historical financial data. That is perfectly understandable and okay. In these cases, be ready to upload whatever financials you do have since start-up.
FAQs
What is the difference between a profit & loss Statement and income statement?
The terms “profit & loss statement” and “income statement” are often used interchangeably, and in many contexts, they refer to the same financial document. However, there might be some subtle differences in how they are used in various industries or regions. Generally, they both represent a summary of a company’s revenues, costs, and expenses during a specific period.
Can I upload both my tax returns and financial statements?
No, but you can consult with you advisor, lender, or CPA on which you should use as the basis for your valuation. When both are upload, you are leaving it to BizWorth to choose which to use and we’d prefer that you and your advisors make that decision.
Are you reconciling my financial statements to my tax returns?
No, the reconciliation between tax returns and financial statements occur with our Quality of Earnings (QOE) reports, not during the valuation process. If you are interested in BizWorth reconciling these records, be sure to inquire about our QOE reports.
What is the Self-Service option, and how does it differ from Full-Service?
The Self-Service option is designed for members of BizWorth’s Valuation Partner Program with specialized training and knowledge who prefer a hands-on approach to the data collection process. Unlike Full-Service, it puts the responsibility on the member to complete the Financial Intake Spreadsheet, allowing for more active involvement in the data collection phase. This is only available to members ordering informational valuations (not Certified Summary Reports) for their clients and delivering reports under their brand.
How long does the Self-Service process take versus Full-Service?
The estimated delivery date of the report is the same for both services; however, if the business owner is unavailable for the owner’s interview when requested, there will likely be a delay in report delivery until the owner is available to participate in the interview.
Is Self-Service suitable for businesses of all sizes?
No, Self-Service is ideal for only businesses with annual revenue less than $50 million.
How do I access the Financial Intake Spreadsheet if I’m a member of BizWorth’s Valuation Partner Program?
Members can find the spreadsheet by clicking the "i" icon at the top of the page of the member’s secure data collection portal or under "Files shared with you." The spreadsheet requires details such as company name, P&L statement dates, balance sheet dates, and specific financial data, including revenue, expenses, and adjustments.
What level of financial expertise is required for the Self-Service option?
The Self-Service option is tailored for members of BizWorth’s Valuation Partner Program who have specialized training and knowledge in financial matters.
Can I switch from Self-Service to Full-Service during the valuation process?
No, once the valuation process has commenced, it's not possible to switch from Self-Service to Full-Service without first cancelling the existing order. This ensures consistency and efficiency in the valuation workflow. It's recommended to determine the preferred level of service before initiating the process to align with your desired involvement throughout the valuation. However, if you wish to change your service level, you can cancel the existing order, then proceed to re-order the report with the desired Full-Service option. This process allows flexibility in adapting to your preferences but requires canceling the initial order and placing a new one.
What information is collected on the Financial Intake Spreadsheet?
The Financial Intake Spreadsheet is a comprehensive tool designed for experienced members of the Valuation Partner Program to provide essential financial information. Here's a detailed description of the key sections:
General Information:
- Company Name
- Name of Person Completing Spreadsheet
- Phone Number of Person Completing Spreadsheet
- Valuation Date (Month End, Year End, or Quarter End preferred)
Profit and Loss (P&L) Statement:
- Dates for P&L Statements (for the past three years and trailing 12 months)
- Revenue
- Cost of Goods Sold (COGS)
- Operating Expenses
- Other Income/(Expenses)
- Taxes: Federal & State, if applicable
- Net Income
P&L Detail & Adjustments:
- Breakdown of adjustments for Revenue, COGS, Operating Expenses, and Other Income/(Expenses).
- Specific adjustments include Addbacks/Deductions for various items like forgiven PPP loans, non-cash expenses, and others.
Balance Sheet:
- Dates for the Balance Sheet (for the past three years and trailing 12 months)
- Total Assets
- Total Liabilities
Balance Sheet Details for Market Approach Adjustment:
- Specific asset details, including Accounts Receivable, Accounts Payable, and Long Term Debt, important for the Market Approach Adjustment.
Additional Notes:
- A section allowing users to provide any additional notes they consider important for the valuation.
The spreadsheet is structured to capture crucial financial data, adjustments, and specific details necessary for an accurate valuation. Users are encouraged to fill in the information accurately and upload the completed spreadsheet in Excel format for a streamlined and efficient valuation process.
On average, businesses will sell at only 70% of the asking price.
Valued companies sell at closer to 90% of asking price.
Prepare for owner's interview
What questions could you be asked?
An owner's interview is a critical component of the business valuation process. It involves direct communication between the business owner or key executives and the valuation professional to gather information and insights essential for determining the value of the business. This interview helps the valuation expert understand various aspects of the business, its operations and financials.
Here are some key elements typically covered in an owner's interview for business valuation:
Essentials & Standard Information Valuation – Owner’s Interview
Here are some key topics and questions that may be covered during an owner's interview:
1. General Information:
- How long has the company been in business?
- Is there any customer concentration? Are there key customers who represent a large amount of revenue? Are the owner relationships crucial to customer retention?
- How strong is the management team? How long have they been with the company and will they stay on with a new owner, if the business is for sale?
- How strong is the competition?
- What is the target companies’ share of the market?
- Is location a factor in the operation of the business? If so, does the company currently operate in a desirable location?
- What are the capacity levels of the company currently?
- Discussion of the company’s strengths, weaknesses, opportunities, and threats.
- What are the projections for the current years revenue and operating profit? Next year?
- Are there any significant changes to the business planned soon? Expansion, new revenue streams, etc.
- Are there additional capital expenditures requirements to support future growth?
- Specific and clarifying questions may be asked about the company’s services, key customers, nature of the revenue (recurring vs. non-recurring, contractual, seasonal, etc.).
2. Financial Questions:
- Questions about any sharp increases or decreases in revenue and expenses year-over-year.
- Questions about potential adjustments, including non-operating expenses, non-recurring expenses/revenue, owner prerequisites, etc.
- Questions about owner’s compensation to determine if any adjustments are necessary.
3. Other
- Do you have any additional notes or information you feel is important for the valuation?
Certified Summary Reports – Owner’s Interview
For Certified Summary Reports, you will receive a list of questions prior to the scheduled owner’s interview. You are asked to provide written responses at least three (3) hours before the interview or your interview may be rescheduled, and the delivery of your report delayed.
In addition to the sample topics and questions provided for informational valuations (listed above), you may also be asked to provide more detailed information on the following topics/questions:
General Business Information:
- Key milestones of the business and/or changes over time.
- Background on the significance of the current valuation date and/or purpose of the valuation.
- Information on company subsidiaries, investments, or related companies associated with the business.
Company Operations:
- Clarification on the nature of the services or products offered by the business.
- Locations of the business, and/or activities occurring at each location.
- Family members employed by company, their roles and compensation.
- Anticipated changes in federal or state regulations that could impact the business in the next 12-24 months.
Financial Overview:
- Insights into the company's customer base, including recurring purchases, long-term contracts, and changes in customer growth.
- Significant changes in the ownership structure or transfers of ownership interests since the last valuation.
Income Statement and Financial Performance:
- Detail of any income statement line items, including other income, non-deductible expenses, and officer compensation.
- External factors, such as economic changes, impacted the business, and strategies in place to address any challenges?
Balance Sheet and Assets:
- Discussion of any past or contemplated adjustments, if needed.
- Any additional details or updates about the balance sheet that should be considered.
Ownership and Management:
- Active involvement of key individuals in the management of related companies.
- Any new contracts in place?
Company History and Growth:
- Discussion/questions on why the business originally started, and how has it evolved and grown over time.
- Any additional investments or ventures that the business is involved in that may need discussion.
Read the Report
What you should know before reading your report
Understanding the intricacies of a business valuation report is paramount for a business owner and their advisors. Beyond determining the current market value, this knowledge empowers owners to make well-informed decisions regarding sales, mergers, or strategic moves.
Your report serves as a benchmark for identifying areas of strength and weakness, aiding in strategic planning and continuous improvement. In negotiations, a comprehensive understanding allows owners to justify and support their proposed listing price. Whether for estate planning, tax considerations, or compliance with legal regulations, a clear grasp of the valuation report is indispensable. Additionally, it facilitates effective communication with stakeholders, helps set realistic expectations, and positions the business for financial success and growth.
Here are some key terms you should know to get familiar with reading valuation reports:
1. Valuation Approaches
There are three valuation approaches (market, income, and asset). A valuation approach is a broader framework or methodology used to determine the overall value of a business or asset. It represents the overarching strategy or perspective applied in the valuation process.
- Market Approach: Compares the subject business to similar businesses in the market that have been sold or valued.
- Income Approach: Focuses on the present value of the future income and cash flows generated by the business.
- Asset Approach: Values the assets of the business, often considering the net book value or replacement cost.
2. Valuation Methods
Valuation methods are specific techniques or procedures used within a particular valuation approach (market, income, and asset) to derive a numerical value. These are the detailed steps or calculations employed to assess the value of the business. Depending on the chosen valuation approach, various methods may be used under each approach.
- Comparable Private Transaction Method: The Comparable Private Transaction Method is a market approach used in business valuation to assess the value of a company by comparing it to similar private transactions in the market. This method relies on data from recent transactions involving the sale of ownership interests in comparable private companies. Analysts identify transactions with characteristics similar to the subject company, considering factors such as industry, size, and financial performance. By analyzing the pricing multiples and terms of these comparable private transactions, an estimate of the subject company's value can be derived. It is common for BizWorth to use the comparable transaction method because of the availability of past private transactions that are the relative size of the subject business.
- Guideline Public Company Method: The Guideline Public Company Method is another market approach that involves evaluating the subject company's value by comparing it to publicly traded companies. Valuation professionals identify a set of publicly traded companies that closely resemble the subject company in terms of industry, size, and other relevant factors. Key financial metrics, such as price-to-earnings ratios and market multiples, are analyzed to establish a valuation benchmark. The valuation of the subject company is then derived based on the average or median multiples observed in the guideline public companies.
- Prior Sales of Interest in Subject Company: This method involves examining the historical transactions of ownership interests in the subject company. Valuation professionals review past sales or transfers of shares within the company to understand the pricing and terms of these prior transactions. This information is valuable in assessing the market value of the subject company's ownership interests. By analyzing the prices paid in previous sales of similar ownership stakes, analysts can derive insights into the historical market value and use this data as a reference point for the current valuation.
- Capitalization of Earnings (Cash Flow) Method: The Capitalization of Earnings (Cash Flow) Method is an income approach used to estimate the value of a business based on its expected rate of return. This method involves capitalizing the business's projected earnings by dividing them by the capitalization rate. The capitalization rate represents the rate of return required by an investor to justify the investment. The result provides an estimate of the business value based on its ability to generate earnings over time. This method is often used for businesses with consistent and stable earnings.
- Multi-Stage Growth Method: The Multi-Stage Growth Method is an income approach that recognizes a business's potential for growth over multiple stages. Unlike traditional methods that assume a constant growth rate, the multi-stage growth method considers different growth rates for distinct periods. Valuation professionals project the cash flows for each growth stage, applying appropriate discount rates. This method is suitable for businesses with expected variations in growth rates over time. It provides a more nuanced valuation, accounting for the dynamic nature of a company's growth potential.
- Discounted Cash Flow (DCF) Method: The Discounted Cash Flow (DCF) Method is another fundamental approach within the income approach to business valuation. It involves estimating the present value of a company's future cash flows. Valuation professionals project the expected cash flows the business will generate over a specified period, usually five to ten years. These projected cash flows are then discounted back to their present value using a discount rate that reflects the time value of money and the risk associated with the business. The DCF method provides a detailed and comprehensive valuation by considering the entire cash flow timeline and is particularly suitable for businesses with predictable and stable cash flow patterns. This method may be used when a company expects a change in future capital expenditures (or revenue and expenses), anticipates high near-term growth rates to normalize at lower levels in the long term and/or has a reliable income projection.
- Book Value Method: The Book Value Method is an accounting-based approach used in business valuation. It calculates the value of a business by subtracting its total liabilities from its total assets, resulting in the net book value. This method relies on the company's balance sheet figures, considering the historical costs of assets and liabilities rather than their current market values. While the Book Value Method provides a straightforward assessment of a company's net worth based on its recorded financial data, it may not reflect the economic reality of the business, especially for companies with significant intangible assets or those in rapidly changing markets.
- Adjusted Net Assets Method: The Adjusted Net Assets Method is an enhancement of the Book Value Method that considers adjustments to the net book value of a business. Analysts make adjustments to the recorded assets and liabilities, accounting for factors such as market value fluctuations, the revaluation of assets, or the inclusion of intangible assets not reflected in the book value. This method aims to provide a more accurate representation of the business's economic value by considering adjustments that align with its current market conditions. The Adjusted Net Assets Method is particularly useful when the book value alone does not adequately capture the business's true value.
3. Financial Statements
- Profit and Loss (P&L) Statement: Also known as the Income Statement, this document summarizes the revenue, costs, and expenses over a specific period. It provides insights into the business's profitability and operational efficiency.
- Balance Sheet: The Balance Sheet offers a snapshot of a company's financial position at a specific point in time. It details its assets, liabilities, and equity, showcasing the overall health and financial structure of the business.
4. Adjustments
- Addbacks: Addbacks are adjustments made to financials to account for non-recurring, or discretionary expenses. Examples include one-time legal fees or owner perks that may not reflect the ongoing operational costs of the business.
- Deductions: Deductions involve reducing reported figures to eliminate non-essential or extraordinary items. These adjustments aim to provide a more accurate representation of the business's financial performance by excluding non-operational or non-recurring items.
5. Comparable Companies
- Peer Comparable Analysis: This analysis involves comparing the subject company to similar firms based on characteristics such as company size, industry, region, and/or financial performance. Analysts assess various financial metrics, market multiples, and operational characteristics to gauge the business's relative position in the market.
6. Valuation Summary
- Valuation Summary and/or Executive Overview Section: Found within the business valuation report, the Valuation Summary Section offers a concise overview of the key findings derived from the valuation process. It includes the value of the business and highlights critical factors influencing the valuation, such as key assumptions, risks, and considerations.
7. Benchmarking Ratios
Benchmarking ratios are financial metrics used to compare a company's performance against industry averages, competitors, or predefined benchmarks. These ratios provide insights into how well a company is performing relative to its peers or industry standards. Benchmarking ratios help businesses identify strengths, weaknesses, and areas for improvement. Common benchmarking ratios include:
Liquidity Ratios:
- Current Ratio: The Current Ratio is a measure of a company's short-term liquidity, assessing its ability to cover immediate obligations. It is calculated by dividing current assets by current liabilities. A ratio above 1 indicates the company has more assets than liabilities due in the short term.
- Inventory Turnover Ratio: The Inventory Turnover Ratio evaluates how efficiently a company manages its inventory by dividing the cost of goods sold by the average inventory. A higher ratio suggests effective inventory management, while a lower ratio may indicate overstocking.
- Days' Inventory Ratio: The Days' Inventory Ratio measures the average number of days it takes for a company to sell its entire inventory. It is calculated by dividing the number of days in a period by the inventory turnover ratio. A lower days' inventory ratio implies faster inventory turnover.
Asset Management Ratios:
- Net Fixed Asset Turnover Ratio: The Net Fixed Asset Turnover Ratio gauges how efficiently a company utilizes its net fixed assets to generate sales. It is calculated by dividing sales by the average net fixed assets. A higher ratio indicates efficient asset utilization.
- Asset Turnover Ratio: The Asset Turnover Ratio measures how effectively a company employs its total assets to generate revenue. It is calculated by dividing sales by average total assets. A higher asset turnover ratio indicates efficient asset utilization.
Debt Management Ratios:
- Times Interest Earned Ratio: The Times Interest Earned Ratio assesses a company's ability to meet its interest obligations. It is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio indicates better interest coverage.
- Debt-to-Equity Ratio: The Debt-to-Equity Ratio evaluates a company's financial leverage by comparing its debt to shareholders' equity. It is calculated by dividing total debt by shareholders' equity. A lower ratio suggests lower financial risk.
Profitability Ratios:
- Gross Profit Margin Ratio: The Gross Profit Margin Ratio indicates the percentage of revenue retained as gross profit after deducting the cost of goods sold. It is calculated by dividing gross profit by revenue. A higher ratio suggests better profitability.
- Operating Profit Margin Ratio: The Operating Profit Margin Ratio assesses a company's operating efficiency by measuring the percentage of revenue retained as operating profit. It is calculated by dividing operating profit by revenue. A higher ratio indicates efficient operations.
8. Loan Eligibility
In the intricate landscape of buying and selling a business, the Debt Service Coverage Ratio (DSCR) emerges as a crucial metric, determining the loan eligibility of the Company's ultimate selling price. DSCR is a measure of a company's ability to service its debt from its cash flow.
Banks impose stringent requirements, typically ranging from 1.15x to 1.50x, scrutinizing the most recent year while back-testing against preceding years.
This ratio, commonly calculated as (EBITDA - CAPEX)/Debt Service, demands assumptions about loan characteristics.
Advanced advisors employ this data within valuation engagements, conducting meticulous back-tests on prior years to uncover loan eligibility issues. The outcome not only influences the estimated selling price but also prompts potential deal restructuring for sustainable cash flow.
The loan eligibility section of a valuation report sheds light on the DSCR trends, offering a glimpse into the financial health and loan eligibility of the Company's valuation and ultimate sales price.