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Business Valuation Insights
How a Discount for Lack of Marketability (DLOM) is Determined
June 10, 2021 / in Business Valuation / by Joe Orlando
In a prior chapter of my professional career, I focused on equity security valuations for tax and financial reporting purposes. I led a team of valuation experts who determined the strike price of options granted to employees of up-and-coming technology companies on their way to IPO. For most, that strike price represents the basis (or cost) of an employee’s future wealth (and tax bill). In simple terms, the valuation of these shares in private companies …
Fair Market Value – what does it mean? Business Valuation Standards of Value Terminology
May 18, 2021 / in Business Valuation / by Louis Cionci
Fair Market Value is one of several standards of value terminology used in business valuations. The Fair Market Value (FMV) term is used by the IRS in estate and gift taxes, can be found in many buy-sell agreements, and is frequently the standard of value used in a business valuation report. Anyone who reads a business valuation report by an accredited professional will likely see the Standard of Value stated in the opening pages and …
Valuation of Intangible Assets
May 12, 2021 / in Business Valuation / by Victor Vazquez
As a follow-up to our posts “Profit from Intangible Assets in a Business Sale” and “Understanding the Value of Intangible Assets”, this post offers answers to the question, “How do you value intangible assets?” In one of these posts, we looked at a simple example for valuing the Bayer tradename associated with its sale of aspirin using a simple capitalized earnings approach to a likely royalty stream. While the valuation of intangible assets is the …
Understanding Discount Rates The Equity Risk Premium – Part 2 of 5
April 19, 2021 / in Business Valuation / by Joe Orlando
Our prior post and educational discussion of the discount rate as “one of the most important inputs surrounding the valuation of the business” introduced the first input of the build-up approach, the risk-free rate. The second key input is the equity risk premium. In our reports, we define this input as “The ERP represents the extra yields demanded and earned (and risk assumed) over time by equity investments in large public companies over U.S. Treasuries. …
Understanding Discount Rates The Risk Free Rate – Part 1 of 5
March 15, 2021 / in Business Valuation / by Joe Orlando
One of the most important inputs surrounding the valuation of the business is the discount rate that is used in the analysis. This discount rate is the expected rate of return on the subject interest which in most cases is the equity in the value of an operating business. Most often in our practice, this equity is attached to a private business that is owner operated. Over the next few weeks, I will dig into …
SBA Covers 3 Months of Payments on New Loans
March 4, 2021 / in Business Strategy, Business Valuation, News / by Al Statz
As part of the Economic Aid Act that passed in December, the Small Business Administration will make borrowers’ payments for three months on new SBA 7(a) and 504 real estate and micro-loan programs. These incentives were available last summer under a stimulus program that expired in September 2020. Now the program has been revived and enhanced. The SBA will make the first three months of payments (principal and interest) on new loans approved between Feb. 1 and Sept. 30, 2021. To be clear, these payments …
Six Benefits of Monitoring Company Value
January 4, 2021 / in Business Strategy, Business Valuation / by Al Statz
Even if your business is not for sale, monitoring its market value can be incredibly helpful. This article describes six ways that understanding value over the life of a closely held business benefits shareholders, directors and managers. 1. Value Report Card Like financial statements, an annual independent business valuation is a type of report card on company health. CEO’s can use this report card to educate, align and focus executive teams on maximizing enterprise value. …
Discover Exit Strategies’ New Checklist of COVID-Era Normalization Adjustments
November 5, 2020 / in Business Valuation, News, Sell a Business / by Al Statz
For most of us, 2020 has been one of the most challenging years of our lives. The pandemic has affected business performance both negatively and positively, temporarily and structurally. It will permanently reshape the global economy in several ways, most of which we are just beginning to understand. Change and uncertainty makes the job of valuing and appraising businesses and business assets more challenging. At the core of every business valuation analysis is the process …
Ten Key Drivers of Company Value
October 15, 2020 / in Business Valuation, Exit Planning / by Joe Orlando
In our current time of economic recession, social unrest and political partisanship, simple questions rarely have simple answers. For an owner operator of a small- to mid-size business, the question of business value in today’s market is increasingly difficult. It is at these times that the team here at Exit Strategies Group (ESGI) feels the need to simplify the process down to the basic premise of what drives value. In explaining value, ESGI default to …
Gifting Window for 2020 May Be Closing
September 9, 2020 / in Business Valuation, Exit Planning, News / by Joe Orlando
With a Global pandemic and prospects of a sustained recession with double digit unemployment coupled with West Coast wildfires and East Coast hurricanes, I would say that everyone in these United States is looking forward to ringing in the New Year on January 1st. But before the ball drops on a socially distanced crowd in Time Square, you should think about other changes that may occur as we put 2020 in our rear-view mirrors. Specifically …
Exit Strategies Group, Inc. is a leading provider of business sales and acquisitions, business valuations, and exit planning services for family owned and closely-held companies since 2002.
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