Business Valuation Services in Phoenix
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If you consider selling, buying or a merger and acquisition of your company, Wiley Financial provides trusted business valuation services in Phoenix. Business valuation is fundamental in finding the best value for a business transaction. A valuation of a business depends on its profile and the interests of the potential buyers. Conducting business valuation in Phoenix is an essential milestone. It provides your business with an intrinsic value. Business valuation projects an estimated position of your company within the competitive market and offers future market and financial expectations. The types of products, cash flows, sector and the size of your company will determine the valuation method.
Pre-Money and Post-Money Valuations
Pre-money valuation is the financial position of a business before the input of investors’ capital is injected into the business. It is usually determined by calculating the business assets, revenues, and liabilities. The valuation analysis may also comprise the business plan, market, competition, external factors and strategy. The assessment provides the company’s value before any pool of funds is added by investors.
Post-money valuation provides the business value after investors have raised capital through fundraisings. Based on the post-money valuation recommendations, an investor will inject a similar amount of capital into the business. After the pre-money valuation, more shares for the investors are added. The investors are therefore allocated some percentage ownership of the company that correlates with the amount of capital.
Frequency of Business Valuations in Phoenix
You may perform your business valuation for various reasons. These reasons will determine the frequency of the business valuation. Investors often perform business valuation and appraisal in Phoenix, AZ, when making investment decisions or on an impending IPO. Other periods of conducting business valuations are when there are potential buyouts or sales. It is recommended to hire a reputable firm for business valuation services in Phoenix. The complexity and the process involved in the valuation call for an experienced valuation expert. Small businesses may conduct the valuation on rare occasions or avoid them. However, for strategic planning purposes, a small business may conduct a business valuation within five or ten years of starting the business. Small businesses that do not require funding from investors may opt to value their assets when selling their businesses.
Businesses that rely on financing from investors and have high levels of investment might require annual or yearly valuation annually or when needed. Some activities such as business analysis may necessitate a business to conduct a business valuation. Business valuations are normally done according to the market’s economic landscape movement. In addition, companies that deal with high-stakes of transactions and activities require regular valuations. Wiley Financial offers comprehensive advice and business valuation services in Phoenix. You will get precise information on the type and frequency of your business valuations.
Business Valuation Approaches
The comparable approach is the most famous valuation technique. It is easy to understand and is a straightforward approach. The approach uses a simple and basic valuation formula. The comparable approach draws financial metrics from similar businesses for analysis. These data include EBITDA, tax, net profit, earnings, revenue and interest. A valuator can easily compute the valuation based on similar businesses that have undergone sales or acquisitions in the market. There are several factors to be considered when looking for comparables. These include size, market, customers, purchasers, and synergies.
Discounted Cash Flow
Discounted cash flow uses a projection or a future forecast to determine the valuation of the present cash flow. A forecast of five to ten years is used to find the current value of a business. The main limitation of this approach is the difficulty of forecasting a business’s cash flow in the future. There are two variations of discounted cash flow.
1. Discounted Factor
The discount factor represents the buyer’s uncertainty about future cash flows. When the discount factor is higher, the buyers will be less confident and vice versa.
2. Terminal Value
A discounted cash flow must have a terminal value. The terminal value represents the value allocated to cash flows after exceeding a certain date. A common value normally used is the sale value and residual value.
Assets Based or Sum-of-the-parts
This approach’s principle is that a business’s total value is the total sum of its parts. Unlike the comparables sales cash flow, asset-based valuation focuses on the business components such as equipment. Businesses with assets such as machinery or furniture employ this approach for their valuation. The best thing about this approach is that the buyer knows the actual item they are buying. The asset-based method is a good fit for businesses with departments that operate independently or under different conditions.
Wiley Financials is an expert in all aspects of business valuation services in Phoenix and other parts of Arizona. Contact us today to get started on the business valuation your company needs.