| The Company Offering Package consists of a professionally prepared, comprehensive Business Valuation and Company Presentation.
The Valuation Process for Private Companies
There are many variations and combinations of methods to select from to value a private business. One of the better (and more expensive) business valuation software packages used by CPA’s touts 26 distinct methods available to value a business. Obviously, it is important to select the method that best compliments your business.
The valuation of a private company is a complex process that requires detailed analysis of all the variables that can affect the price. It is important for Owners to understand the general method used to obtain a valuation in order to get the maximum potential from the sale of their company.
Cash flow is a critical component of the value of a business. In almost all cases predictable income has a far greater affect on the price of a business than does its asset base.
To determine the actual cash flow of a private business it is necessary to recast the income statement to adjust for past efforts to minimize taxes and to provide extra benefits for the Owner. This recasting entails adding back all Owner and family related expenses to income and adjust the assets from Book Value to Fair Market Value.
[See "Preparation of Your Business for Sale", item # 3, for a more detailed description of the mechanics of recasting financial statements. This is in Overview of Selling a Business.]
The 26 methods of valuing a business take into account the income, the assets, or some combination, thereof. If the value of the subject business is heavily weighted toward assets it is critical to get valuation assistance form a professional with experience in this business’ type of industry. This is especially true if there are any intangible assets.
(Pricing, Positioning the Business Sale)
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