Business Valuation

Full Business Appraisal and Calculation of Value

Many business owners who need a small business appraisal in Atlanta, or Sandy Springs GA generally need to provide a significant amount of information and documents to get the process started. This is a true whether they need a calculation of value or a full report (detailed or summary). However, the requirement is smaller for a calculation of value. Burns Valuation Consulting offers a service called calculation of value for a fixed fee, which can be very useful under certain circumstances. A full, small business appraisal is more appropriate in others.  

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What is a Full, small business appraisal

A full, small business appraisal in Atlanta or any other cities provides a report with a conclusion of value that is thoroughly documented. It includes background information about the company, its management, and the economic environment and historical financial performance. Depending on the future prospects of the business, it can hinge on projected financial statements as well. Users of the report (owners, lawyers, buyer and sellers, etc.) with varying knowledge about the subject company can read the report and understand the company and the methodology used to value it. If done correctly, the users of the report should all come to the same or similar conclusions as the expert author of small business appraisals.

Business Appraisal in Atlanta

What is a Calculation of Value?

A calculation of value, on the other hand, the business valuation appraisal expert and company/client agree before-hand on what background information will be used to support value as well as procedures to be used. The conclusion, in this service offering, will be expressed as a calculated value and can be significantly less expensive than a full valuation report.

This can be just as useful for clients are contemplating divorce, seeking to buy/sell a business, etc. and just want to know value to start discussions. However, the results might be different if full, small business appraisal is performed and a disclaimer to this effect has to be included. Therefore, a calculation of value is inappropriate in some certain situations like when there are multiple users, trials/litigation contemplated, and other similar and complex uses. A calculation of value provides only the financial reports with footnotes about assumptions and why certain numbers were used. Full small business appraisals must consider each of the income-based methods, a market-based method and an asset-based method. In a calculation of value, the valuation method is determined before-hand with client and business valuation expert.

When is a calculation of value report useful?

Calculations of value are useful when the users are limited and all have a good familiarity with the company. A few examples of life circumstances where this might be useful:

  • An owner is retiring and wants to know what an eventual sale might look like or what proceeds he/she can expect to receive.
  • Business owners who receive unsolicited offers to sell and want to be able to gauge whether such offers as credible or reasonable.
  • Owners want to draft or periodically review buy-sell agreements.
  • A divorcing owner or spouse needs to know approx. value to begin a settlement discussion

When is a full valuation report more useful?

A full, small business appraisals report is more useful in the following circumstances:

  • Conclusion of Value will be used in a court case or submitted to a third party for an official purpose.
  • The report will be submitted to a court or to the IRS for tax purposes.
  • There multiple users who have little knowledge of the company and need to make critical decisions that are directly related to the value of the company.

Conclusion

There are circumstances that generally dictate one of these approaches. A calculation of value can be more cost effective if used in the right way and for the right purposes. However, it can cause more confusion if relied upon in complex scenarios. Contact Brad Burns @ 770-380-2406 or Brad@BurnsValuationConsulting.com for a complimentary consultation on valuing your business today. We offer 3 service levels: Calculation of Value (Fixed Fee) as well as full, small business appraisals that can come in a summary or detailed report format.

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