Something has come up and you need to know what your business is worth. Do you need the advice of a business valuation expert to figure this out or can you do it on your own?
The business down the street sold for $10 million, the former owner claims. Your business is about half the size; so is it worth $5 million? Or you’ve heard you can approximate your business’s worth by multiplying its income by six. Will that suffice?
In a word, no.
“Neither of those business valuation methods are remotely reliable,” says David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of business valuation services in the Delaware Valley. “A small software company named WhatsApp would have valued itself at between $50-$60 million using the six times income method. But earlier this year, they sold themselves to Facebook for $19 billion — more than 300 times higher.”
If you really want to know the true worth of your business, says Anderson, you need a highly qualified business valuation expert.
There are many reasons a company may need to know the accurate value of its business: partner/shareholder disputes; gifting a portion of the business; sales, mergers and acquisitions; divorce; estate and trust matters; insolvency, and a host of other issues.
Depending on your situation, you may need one of two types of business valuations. A calculation of value is an informal business valuation that provides a reliable approximation of your business’s worth. A full-blown formal business valuation is important for estate planning, gifting and litigation.
A Certified Valuation Analyst will determine your business’s true income, examining salaries, expenses, profits, losses and more. Are you paying yourself or your family members more or less than what outside managers would cost? Do you have company cars or special deferred compensation programs for family members or any other expenses a third party would not incur? Do you have one-time expenses related a lawsuit or losses from a natural disaster?
In calculating your business’s worth, a professional business valuation expert also considers industry, geographic and economic factors, as well as recent sales of businesses similar to yours.
Don’t rely on gut instinct, street rumors or amateur rules of thumb when you need an accurate business valuation. Put your trust in a Certified Valuation Analyst to find out what your business is really worth.
If you require the services of a certified business valuation expert, please contact the Philadelphia forensic accounting firm of David Anderson & Associates today by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.
