|INNOVATIVE MANAGEMENT SERVICES, LLC
Business Consulting Excellence Since 1984
Why Do I Need a Valuation?
Business Valuations are Usually Performed for Five Primary Reasons:
1. To establish a price for a transaction
2. Business planning
3. Attract capital
4. Aid in estate and gift planning
5. Comply with governmental requirements (I.R.S., etc.)
What Is a Business Valuation?
A Valuation is sometimes referred to as an appraisal, but there are differences. An appraisal will usually result in values being placed
on only the tangible assets of a business, such as equipment and machinery, land and buildings. For your business, you will want a
The Valuation includes not only the tangible, but also the intangible assets such as intellectual property, patents, and goodwill. Most
important, it considers the future projected income of the entity.
The standard of value applied is Fair Market Value, which is defined as "...the price at which property would change hands between a
willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to
sell, both parties having reasonable knowledge of relevant facts."
Our approach is to determine an estimated value which would provide a fair and reasonable return on investment to an investor or
owner, in view of the facts available to us at the time. Both internal and external factors which influence the value of the company are
reviewed, analyzed and interpreted. Internal factors include the company's financial position, results of operations and the size and
marketability of the interest being valued. The bottom line, however, is that a company is best valued by quantifying how much profit it
will supply to its owners in the future!
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We begin by analyzing your firm's financial statements - usually at least three years' worth. We adjust those historical statements and forecast what the estimated future
One of these methods, for example, is a study of sales of comparable companies in your industry, using databases of businesses sold. These are then weighted for
finances of the firm will look like. We load this information into our proprietary valuation models, using an average of ten different methods to arrive at an array of values.
relevance to your firm, and a final value range is the result.
Meanwhile, we analyze all of the other factors which bear on a valuation, such as industry trends, the status of the industry, the position of the entity relative to the
industry, the economy, and how the risk/reward of your company compares with all other possible investment types that exist.
The draft valuation report is then prepared and shared with the Client. Any changes needed are made and the final report is prepared and delivered.
Our Valuation Service Types
Two types available of valuation reports are available. The first is the "Limited Scope" Valuation, which is similar to a summary report. It doesn't give a single number,
but arrives at a range of fair market values. It doesn't include a lot of industry and business information that you probably already know. Instead of the 40-plus pages that
a full-scale valuation might run, the Limited Valuation will usually average fifteen pages.
The "Full Scope" Valuation includes all of the content of the Limited Scope; however, it will include a large amount of industry and business information. This report
model is better suited for large entities, which are using it for presentation to large numbers of investors, for example.
Valuations don't have to be just for your firm; we have done a large number of these for Clients who are interested in buying a company and want to know its
approximate worth before proceeding.
Whichever report you choose, you will receive exactly the same valuation range for the entity. The same methodology is employed for both, and the same financial
valuation models are used.
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