Forensic Accountants Provide Quality Business Valuations
Reliable services for transactions and litigation involving companies of all sizes
How much is a business worth? As with many things in life, the answer begins with “that depends.…” So many factors go into the valuation of a business that a small oversight can skew calculations and produce a figure that’s woefully unreasonable. We know that not every component of a business is easily quantifiable, and how you assess the intangibles, such as trademark value and customer goodwill, can make a huge difference in the final assessment. At NAFA, we have certified experts in forensic accounting with decades of experience in business valuations that you can trust for a reliable report based on sound processes and meticulous attention to every detail.
Business valuations for a wide range of variety of situations
Our clients request business valuations for a number of purposes, which include:
- Sale or purchase
- Estate planning and probate
- Business succession planning
- Divorce proceedings
- Bankruptcy
- Fraud and embezzlement investigations
- Tax evasion and financial misconduct allegations
- Professional malpractice
- Insured loss calculations
- Settlement negotiations
- Mergers and acquisitions
- Corporate divestitures
- Partnership dissolutions
Although we have vast experience with a wide range of small-to-large businesses spanning various industries, our firm is rich in industry specific knowledge related to:
- Banking and financial services
- Construction
- Food processing
- Landscaping
- Law firms
- Manufacturing
- Nonprofit corporations
- Pharmacy
- Retail
- Transportation and warehousing
Our firm’s leadership also has extensive experience providing expert witness testimony, and are available to provide robust litigation support.
Common methods of business valuation
There are several generally approved methods of calculating the value of a business. Three leading methods are:
- Asset-based approach — This mode of valuation tallies up all the company’s investments one of two ways. First, you might use the “going concern” or “book value” approach which reviews the company’s balance sheet, compiles lists the assets and liabilities, totals each category and subtracts one from the other. The second approach calculates the liquidation value, that is, the net cash you’d have if you sold all company assets and paid off all its liabilities. These methods work well for corporations, which own all of their assets. It’s a little complicated for small businesses run as sole proprietorships, because there is not always a clear division between business and personal assets.
- Earning value approach — this method attempts to gauge a company’s potential to produce wealth in the future. Again, there are two ways to calculate earning value. The first is by capitalizing past earnings. This method examines how the company used its past earnings, normalizes that cash flow, then multiplies the expected normalized cash flow by a capitalization factor. The final product is a rate of expected return on an investment of the business. The alternative is the discounted future earnings approach, which averages predicted future earnings, then divides it by the same capitalization factor.
- Market value approach — This method compares the business with similar enterprises that have been recently sold. It’s very much like a realtor’s approach to pricing a home for sale. This approach can be helpful in setting expectations, but it’s limited in many respects. For example, there may not be enough comparable businesses sold to make a comparison. You might also be missing key information about the sale that influenced the price. Did some circumstance compel the owner to sell?
NAFA can not only evaluate your business using one or all of these methods, we can also present a cogent and compelling argument for why one method would be approved above the others in your particular case.
Contact North American Forensic Accounting PC to inquire about business valuation
North American Forensic Accounting PC performs business valuations for companies of all sizes across the United States. To learn more, call us at 347-286-4860 or contact one of our offices online to schedule an appointment. NAFA serves clients from offices throughout the United States, including in Philadelphia, Pittsburgh, New York City, Atlanta, Charlotte, Miami, and the Tampa Bay Area.