valuation program usmss richard flom, cpa/abv/cff, cva
TRANSCRIPT
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Valuation Program USMSSRichard Flom, CPA/ABV/CFF, CVA
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What is your company worth?
Value depends on a number of different things:
1. Buyer2. Industry3. Profitability 4. Cash Flow5. Assets
A valuation is based on the future outlook of the business.
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Buyer
Who would purchase your business?▫Individual ▫Strategic buyer
Generally pay more
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Industry
What industry is your company in?▫Is the industry currently in great demand?
▫What effect does the economy have on your business? (Gov’t contracts with cutbacks in effect)
USMSS members generally provide sales, network, repair, and rental services.
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Profitability and Cash Flow
Is your business profitable?
Does it have positive cash flow?
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Assets
Does your company have assets that are undervalued on the books?
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Values
Fair Market Value:
“The amount 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 seller is not under compulsion to sell, both parties having reasonable knowledge of relevant facts.”
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Values cont’d
Fair Value▫Based on state law
Investment Value▫Business’s worth to that particular buyer
Intrinsic Value▫Value in the eye of the investor
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Types of Valuations
•A Conclusion of Value (An Opinion)
•A Calculated Value
•An Oral Report
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Valuation Approaches
1. Market Approach▫ Guideline company method▫ Transaction method▫ Industry Method – Rules of Thumb
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Valuation Approaches
2. Asset Based Approach▫ Adjusted book value method▫ Liquidation value method▫ Cost to Create Method
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Valuation Approaches
3. Income Approach▫ Capitalization▫ Discounting
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Discounts▫ Marketability▫ Minority▫ Small Company discount (size related)▫ Key Person discount
Premiums▫Control premium
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What should a valuation cost?