Thursday 24 January 2019

How A Business Valuation Appraiser Can Help

By Angela Miller


If one would want to know how much his company is worth, then he needs to make it undergo an appraisal. Now, one may actually do this by himself if he knows how, but it will not be as accurate as when a professional would do it. That would be the job of a business valuation appraiser. For those interested, here are some things to take note of when getting one.

Before going to what they can do to help business owners, it is crucial to first note the situations wherein they are needed. It was already mentioned above that mergers and sales of companies require appraisers. Aside from those two situations, appraisers are also needed when companies need to get a loan, equity funding, or legal disputes.

One of the first ways they can help would be with the process that one has to undergo as to why he or she needs the appraisal in the first place. For example, if he or she needs the appraisal for a merger, then the professional will be able to help slot the valuation into the process smoothly. Appraisers also know the processes for the different reasons for appraisals so they know how to give some sound advice when needed.

After that, they would make an extensive study on the company of their clients based on financial data. Some of the financial data that they would handle include the past performance as well as financial statements. The goal would be to make a report as to whether or not the company has strong earning power.

Now, just to give an idea of how they do it, they would usually get data from the financial statements and performance reports. From there, they will be able to know the potential of the company for the future. The appraisal report would be able to show the buyers whether or not the company is worth investing in with regard to future potential.

Some of the methods that they would use to analyze the financials would be the present value of future earnings wherein the appraiser does an estimate of its value in five years minus inflation. Another method would be to calculate the earnings before interest, tax, depreciation, and amortization to know the present value. These two methods are used to calculate for the present value and forecast the future value.

Other than internal data, appraisers would also have to analyze the placement of the company in the overall market. This means that appraisers are tasked to do market analysis of companies as compared to other competitors. This will allow them to gain an understanding of how the company performs against others.

For those selling or merging their companies, this type of valuation is extremely important. Of course, appraisers are needed so that one can get a valuation that is as accurate as possible since they are experts at handling appraisal data. If one would want to be transparent with the whole process, then an expert has to come in so that there will not be any bias or skew in the data.




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