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.
How Can We Help With Your Business Valuation
If you are in the midst of a merger/acquisition, litigation, divorce, asset dispute, or any business related transaction where you need expert advice, give us a call today at 713-661-1040 to put our experience to work for you. You may also fill ou the information below and one of our business valuation experts will contact you as soon as possible.
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