Your business valuation is the financial lifeblood of your company to the outside world. This is your opportunity to present the internal workings of your company in an attractive way for potential investors.
But what exactly is included on a business valuation report? Let’s take a closer look.
The bottom line of your business is contained in the appraisal summary. It is usually the last thing that a reader comes across and includes the final value of the company and the metrics used to come to that value. If there are multiple methods used, the summary will include all of these methods.
If a business valuation uses more than one methodology to come to a final value, then it will include a summary of approaches. Within this section, there will be indications of value and the reason for the differences in valuation between the different approaches. It will also include the reason why one approach was chosen over the others to come to the final valuation.
Every business will have unique events that could affect the value of the business. These idiosyncrasies should be removed in a valuation so that readers of the report can see how that business would have performed under normal circumstances. For instance, the sale of a division of the business that makes the numbers look good in one quarter should not necessarily be considered moving forward, because that event can never occur again.
If the value of the business was determined through the Capitalized Income Method or Discounted Cash Flow, this summary becomes very important. It includes the rates that help define market risk and helps determine risk premium. If a company has more than one valuation, this section becomes vital because the rates used may change between valuations.
If you want to find to find out how liabilities and assets affected the value of a company directly, the business valuation summary is where to look. If the business has assets or liabilities that are currently non-operational, you will find that out here as well. If you are trying to evaluate the business, you will also need to give your opinion as to whether the valuator included all relevant assets and liabilities. There is a bit of discretion professionals can use here, and your opinion may differ from the business valuator.
If you are looking to create a business valuation or you need help evaluating the documents of a business, you can come to the dedicated experts at Murphy Business. We can provide you with the experienced opinions and metrics to use that will provide the best perspective of the business valuation. Give us a call at (727) 725-7090 or query us directly from our website. Regardless of the business that needs to be evaluated, and no matter which side of the table you are on, we are here to help you interpret these documents in a way that benefits your interests best.