Mergers & Acquisitions...
Merfeld & Schine, Inc.

Our Business Valuation Services

We offer full business valuation services for privately held companies. While most business valuation services cost $8,000 to $10,000 or more, we will perform fully documented business valuations for as little as $1,000 (and almost always under $1,800).

Our valuation reports are generally about 10 pages in length. They explain our reasoning and our methodology in clear and easy to understand language, without a lot of fluff or filler.

Business valuations are performed for any number of reasons, such as:

  • Selling one's company

  • Buying a business taking in a new partner

  • Settling an estate that includes an owned business

  • Attracting venture capital or debt capital (including SBA financing)

  • Just to know the value of one's company

Business Valuation Methods

There are as many valuations methodologies as there are reasons for having a business valuations performed. Most of the methods rely largely upon a company's past earnings. More accurately, they rely on the company's likely future earnings, and past earnings tend to be a good predictor of those future earnings. Of course there are other predictors of future earnings too, which need to be considered.

Recasting Financial Statements

In the case of most closely held private companies, determining past earning is not as simple as looking at the firm's income statement. Business owner often take advantage of fully legal deductions and procedures that result in financial statements that don't accurately reflect real earnings. It is, in fact, an accountant's job to understand the tax code and apply it to his or her client's business to minimize reported earnings and therefore minimize taxes due. In performing a business valuation, the appraiser's job is partly to undo the accountant's work in order to present the company's financial picture in a more real world light.

Beyond the Financial Statements

All reasonable business valuations are based largely on a firm's recent financial statements. However, financial statements do not tell the whole story. As noted above, they are a predictor, perhaps the primary predictor, of future earnings. However, other factor's need to be considered along with a company's financial statements to perform an accurate valuation.

Three companies with three sets of near identical financial statements can easily have three very divergent valuations for any number of reasons, such as:

  • Industry--Is the industry growing or shrinking? Are there other industry factors that need to be considered?

  • Customer concentration--Do one or a few customers account for a significantly large percentage of total business on an ongoing basis

  • Attractiveness--This is a subjective measure. But it is a significant one. Certain industries and certain companies within an industry tend to be more attractive to buyers than are others.

  • Potential--A company's demonstrated potential impacts considerably on its valuation

  • Stability--Companies with stable (predictable) year-over-year sales and earnings generally have higher values than companies where the earnings vary significantly from year to year.

  • Location--All other things being equal, a business located in a major city will have a higher value than one in the suburbs. One in the suburbs will have a higher value than on in a rural area.

These are just a few of the factors that need to be considered along with a company's financial statements in order to produce an accurate real world business valuation.

If you're interested in a business valuation, contact us for a no cost and no pressure initial consultation. Fill out this form, or call us (401-751-3320).

Free Online Business Valuation Calculator

39 Brenton Ave.
Providence, RI 02906
Phone ~ 401-751-3320
Fax ~ 401-489-7339

E-Mail ~

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