There are 2 types of valuations – Wholly-Owned and Minority-Owned. A Wholly-Owned valuation is an appraisal of the entire entity whereas a Minority-Owned valuation appraises a percentage of the value of the firm. In a Minority-Owned valuation there are discounts for the minority owner’s lack of control (DLOC) and discounts for the lack of marketability (DLOM) in an enterprise. Analytic Business Appraisers understands the complexities of these various discounts, as well as the requirements of a Wholly-Owned valuation.
When looking at obtaining a value of any business it is important to look at the motivation of the investor(s). Every valuation engagement is unique. The professionals at Analytic Business Appraisers have the knowledge and experience to identify and understand these differences.
Analytic Business Appraisers assists tax attorneys, financial planners and CPA’s with valuation for the most advantageous management of estate and gift taxes. Analytic Business Appraisers utilizes its expertise in the valuation of businesses; capital stock and real estate backed family limited liability companies, just to name a few. We are skilled in ascertaining correct minority and marketability discounts that are correctly applied and recognized by the tax court as “matching” the assets being valued. This insures the accuracy of the appraisal.
Charitable contributions over $5,000 are required by the IRS to have a certified appraisal. Analytic Business Appraisers provides all documentation required to satisfy these IRS regulations. The Standard of value for gift valuation is Fair Market Value as stated in the Treasury Regulation 20.2031-1 and is defined as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
Some common reasons for gift and tax reports are: charitable gift transactions, estate planning, buy-sell agreements, the filing of gift and estate returns, etc.
Analytic Business Appraisers works with attorneys in the structuring of values relating to buy-sell agreements. When a buy-sell agreement is first drafted between the interested parties, counsel may request an independent valuation of the corporation and the assets being held by the corporation. This is where Analytic Business Appraisers uses its expertise to establish the value of the company and the value of the assets.
Once the buy-sell agreement has been executed there may be future trigging events such as adding new partners, or the retirement of a partner, etc. that may require a revaluation of the business. Analytic Business Appraisers is qualified in valuing your business during both the initial buy-sell agreement formation stage or providing ongoing assistance if a future reevaluation is required.
Today many SBA-guaranteed loans require an appraisal. This fact is found in the provisions made to SBA Standard Operating Procedure (SOP) 50 10 5, where it states that an independent appraisal from a “qualified source” is required on any size loan where there is a close relationship between the buyer and seller, and loans being financed over $250,000 (not including real estate and/or equipment being financed). The report must also be compliant with Uniform Standards of Professional Appraisal Practice (USPAP).
Lenders should be aware that not all appraisal reports are created equal. A “limited” appraisal or “calculation of value” report does not support the requirements set forth by the SBA.
Analytic Business Appraisers is the “qualified source” and delivers a complete SBA compliant “summary” report, written to the stated guidelines in SOP 50 10 5(e), as well as following the USPAP standards.
Analytic Business Appraisers has the expertise to review and prepare valuations for marital dissolution that stand up to legal review. We require the involvement of the client’s counsel to help define the focus for the valuation and assist in the information gathering process. We follow USPAP standards for our appraisals and stay current on the latest updates in legal jurisprudence, since this information must be consistent with the laws of a given state. This is done by constant education on valuation topics offered by leaders in the valuation community, as well as consulting with legal experts.
Analytic Business Appraisers offers expert witness testimony. In these situations we are engaged to testify only on the value of the business, not for the benefit of any parties involved. Our valuation and testimony are based solely on facts.
It is typical to have a business valued in its entirety if it is a small business, but sometimes only a portion of the business (e.g., a minority interest) is valued in a large business. For marital dissolution purposes, the standard of value may not be Fair Market Value; it could be Fair Value or Book Value and discounts may not be allowed. Analytic Business Appraisers has the knowledge and background to provide a professional, certified appraisal for a variety of situations relating to marital dissolution.
Benchmarking is the process of comparing your business performance to other businesses in the same industry. This process can help you determine if your performance is stronger or weaker than your competition and what modifications and enhancements may be needed to streamline operations and improve profitability.
Each industry has a different “standard” that is used to compare performance. The common business performance ratios are as follows:
- Profitability (margins & returns)
- Activity (turnover)
- Liquidity (ability to meet short-term obligation)
- Leverage (the extent of interest-bearing debt used to finance assets)
In benchmarking, each industry also uses different ratios. Analytic Business Appraisers is familiar with these industry standards and ratios and utilize a variety of resources in the benchmarking process, depending upon the size and industry of your company. The following are a few examples of the resources that may be utilized to appropriately benchmark your business: interviews, performed by the appraiser, with your management and key personnel, utilization of K-1’s of publically traded companies relating to your business, information from specific trade industry associations, etc.