Category Archives: Business Plans

Assessing Industry Risk is a Critical Part of the Valuation Process

Go beyond beta Industry risk isn’t something you factor in once and then forget about. The pros consider industry risk throughout the valuation process — and its relevance even extends beyond the income approach. Valuation professionals typically factor industry risk into the cost of capital, using a “beta” or other industry-specific risk premium. Here are…  Continue Reading »

23 Questions to Ask When Hiring a Business Valuation Expert

Richard Claywell was recently a panelist for the Financial Poise webinar: Selecting the Right Valuation Expert for a Corporate Transaction. Richard provided valuable tips to business professionals and deal lawyers about how to identify and attain the right valuation expert for their situation. If you’re looking for a business valuation expert in Houston, TX or beyond, take…  Continue Reading »

4 Ways to Add Value Before Selling a Business

Ready, set, sell A company that is well positioned for future growth is one that investors want to buy. If you’re looking to sell, it’s important to make your business more attractive to potential buyers. Here are some strategies: 1. Obtain a professional valuation A professional valuation can provide objective market evidence of what similar…  Continue Reading »

Market a Business to Maximize its Selling Price

Deal of a lifetime How a private business is marketed can have a significant impact on the cash available for distribution to owners when it’s time to sell. For many private investors, their business interests are their primary assets, so their livelihoods often depend on receiving top dollar. It’s a hot market In recent years,…  Continue Reading »

A Business Interest Can Have Many Different Levels of Value

Define it before you assign it Two key issues when valuing a private business interest include control and marketability. If a business interest possesses elements of control, such as the rights to declare dividends and liquidate assets, then most investors will pay more. They also tend to prefer investments that sell with relative ease and…  Continue Reading »

Relying on Management’s Estimates of Expected Cash Flow

Business valuations are often based on estimates of expected cash flow made by the company’s management. Even when estimates are prepared by a valuator or the company’s CPA, it’s often based on management’s representations about the company’s future plans about potential threats and market opportunities. So, it’s important to evaluate whether expected cash flow seems…  Continue Reading »

How to Estimate Reasonable Owners’ Compensation

Although the issue of reasonable owners’ compensation often comes up in federal tax inquiries, it may also be an issue in shareholder disputes and divorce cases. For example, minority shareholders or the spouses of a controlling shareholder may claim that an owner is taking an excessive amount of salary, thereby impairing the value of the…  Continue Reading »

Is it Time to Switch to Subchapter S Status?

As Baby Boomers approach retirement, they have to face the fact that no one can work forever. If owners of C corporations are contemplating a sale, they may be able to save substantial corporate-level taxes by electing to operate as a “pass-through” S corporation. Here’s more about this tax break, including details on who might…  Continue Reading »

Spotlight on Marketability

Is it difficult to sell a business interest in Texas as well as other states? Public stocks can be converted to cash in three days, but it often takes a year or longer to sell a private business. Minority interests in private companies can be even harder to liquidate, because they may be subject to…  Continue Reading »

Valuators Can Take the “Stress” Out of Financial Distress

In the Houston area, and many other parts of the country, economic uncertainty persists. The American Bankruptcy Institute reported in the first quarter of 2016 that total commercial filings increased 24% from the year before. Valuation professionals can help businesses facing bankruptcy by determining whether liquidation or reorganization makes more sense, and provide guidance on…  Continue Reading »

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