The Complexities of a Valuation Opinion

What is a business valuation opinion? A business valuation opinion is the independent and unbiased process of determining a supportable opinion of the transferable value of a business or company as of a specified date. The filed of business valuation encompasses a wide array of tools and methods with variations between valuators, businesses and industries.

A business valuation opinion provides the business owner with multiple facts and figures regarding the actual worth or value of the company in terms of market competition, asset values, and income values. Business owners should seek professional help prior to selling a business or planning an eventual exit. A variety of complex factors are involved in a valuation opinion.

Intellectual Property

It can be difficult to determine the value of intellectual property or other intangible assets. If your business has trademarks, copyrights and patents, it can be challenging to properly assign a value.

Products and Services

Businesses that only offer one product or service are far more difficult to analyze. If a company has a lot of product diversity, a professional will typically assess a higher value. This is also true for companies that have only one or two key customers. Lack of customer diversity can bring down overall values.

Employee-Owned Companies

Employee stock ownership plans (ESOP) can change a company’s overall value. If a company is partially or completely employee owned, it could lower its marketability.

Life Cycles and Supply Chains

Sometimes, a business is nearing obsolescence due to advancements that have taken place. This is often seen in technology companies. If a business is near the end of its life cycle, this will raise potential issues during the valuation process. On a similar note, if a business is assessed as vulnerable in supply disruptions, this would also lower an overall valuation amount.

Accuracy of Data Received

The person handling the valuation opinion must rely on the accuracy of the factual information they receive. If the numbers are off, the valuation simply cannot be as accurate.

These are just a few examples of some of the complex factors that are involved in a valuation opinion. Every single business owner should know how much his or her business is worth. It’s the only measure that takes into consideration where your company has been, where it is today and, most importantly, where it’s going in the future.

Talk to an expert at EBIT Associates to help you determine what your company is worth.



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