Business
Valuation for
Houston and Texas Businesses
Business Valuations
are frequently required for Business Acquisitions, Buy-Sell Agreements,
Commercial Litigation, Divorce Negotiations, Estate Planning, Insurance
Claims, Partnership Dissolution, Limited Partnership Transfers,
and Minority Shareholder Disputes.
If you require a Business Valuation, we can help.
Call Us at 713-661-1040.
Business Valuation Topics:
Types of Business
Valuations
Cost of Business Valuations
What is Fair Market Value in a Business Valuation
Business Valuation Methodologies
Going Concern Valuation Summary
Going Concern Value - Income Approach
Going Concern Value - Asset Based Approach
Going Concern Value - Market Approach.
Liquidation Value
Small Business Valuation
Types
of Business Valuations
Business Valuations can
be done as either a Calculation Engagement or as a Valuation Engagement.
The level of effort, and therefore cost, will vary depending on
the engagement type selected.
Calculation
Engagement:
In a calculation
engagement the valuation analyst (sometimes called the appraiser)
agrees with his client on the method and valuation formula
to be used to calculate value for the subject interest. The
valuation analyst performs a series of calculations using
the agreed methodology to come up with a valuation that complies
with the agreed approach to value. A calculation engagement
is a substantially lower level of service than a valuation
engagement.
Valuation
Engagement:
In
a valuation engagement the valuation analyst (sometimes called
the appraiser) has the freedom to explore multiple approaches
to valuation and to apply those particular valuation methods
and approaches the valuation analyst deems most appropriate
for the circumstances. This is generally a much more time
consuming (and therefore expensive) process; and it is generally
viewed to be a more accurate determination of value.
Cost
of Business Valuations
Business
valuations can vary greatly in cost depending on complexity
and amount of assets that comprise the “subject interest”
or business be valued. Likewise the choice between performing
a calculation engagement or valuation engagement, the accessibility
of records, and the type of report to be issued will greatly
influence the cost of appraisal.
Although
every business valuation will be different, basic level calculation
engagements or limited partnership valuation engagements appraisals
will typically cost between $3,000 to $10,000; whereas full
scale valuation engagements frequently cost between $7,500
to $35,000.
One
word of caution. Always beware of a “low cost”
appraisal or “bargain basement” appraiser. Many
people have learned the hard way that cutting corners on a
business valuation can cost them the outcome their litigation
when a Court rejects a slipshod valuation, or it fails to
stand up under IRS scrutiny, or courtroom cross examination.
What
is the definition of Fair Market Value in a Business Valuation
The most commonly used definition of fair
market value used in business appraisals is located in Revenue
Ruling 59- 60. This revenue ruling defines fair market value
as
“….the
price at which the property would change hands between a willing
buyer and a willing seller when the former is not under any
compulsion to buy and the latter is not under any compulsion
to sell, both parties having reasonable knowledge of relevant
facts, which is best described as what would a willing buyer
pay, and what would a willing seller accept, neither acting
under duress for a sale of the business."
Business
Valuation Formula
Generally a Business
Valuation seeks to determine the Fair Market Value of
the “Subject interest” which is either an entire
Business, or a portion of, or fractional ownership interest
in, a Business.
