Business Value Tips, Events, & Items of Interest

2009-05-09

Announcement

Marvin T. Brown, CPA/ABV is the author of Valuation Tips for the American Institute of Certified Public Accountants ABV E-Alert Newsletter.

2008-10-31

National Conference Presentation

Marvin Brown, CEO of Brown Valuation Group was a speaker at the Institute of Business Appraisers National Symposium in Chicago. His presentation was entitled "Valuation Marketing: Honing In On success."

2008-07-01

How is Business Value Determined?

Frequently we hear the terms "Rules of Thumb" and Multiples of Revenues Income, or EBITDA (Earnings Before Interest,Taxes, Depreciation and Amortization, Etc.) in regards to determining business value. While rules of thumb and ratios of multiples may place us "in the ball park" insofar as business value, these factors fail to consider 1) expected revenue and earnings growth rates, 2) Risk attributes of the business, and 3)expected capital expenditures and working capital requirements. In summary, it is important to consider and analyze 1)Expected revenues, earnings, and cash flow, 2) Risk attributes of the business, and 3) Expected revenues and Earnings growth rates in order to determine the true value of the business.

2008-02-01

Seminar Presentation: Transactional Valuations

On February 14, 2008 Marvin Brown, CPA/ABV,CVA of Brown Valuation Group and Mark Dayman, CPA/ABV,CVA of Cap Val,LLC presented a webinar entitled " Transactional Valuations: How to Value a Transaction and What Happens When the Transaction Fails?". The Seminar was presented at the Geogia Society of CPAs offices in Atlanta.

2008-01-15

Business Sales Transactions: Asset Sale or Stock Sale?

Asset Sales involve sale of certain assets, usually Inventory, Fixed Assets, Intellectual Assets,and Goodwill. Asset Sales are utilized in most small business sales transactions and in many medium-sized business transactions, (and very seldom with large, publicly-held business transactions.) Most buyers prefer and insist on an asset sale for the following reasons: a. Buyers usually don’t want to assume liabilities. b. Buyers get a stepped-up basis in the assets. c. Buyers don’t usually like to purchase certain assets such as cash or accounts receivable. However, in an asset sale the seller pays gains at the corporate level, liquidates debt, and then liquidates the corporation. Taxes may or may not be assessed at the shareholder level. Stock Sales are utilized in many medium sized business transactions and virtually all large publicly-held business transactions. Insofar as small and medium sized businesses, stock sales are often utilized with business sales to employees and to partners or shareholders since these types of purchasers are more familiar with and have a certain “comfort level” with the subject business. Sellers usually prefer a stock sale transaction a. The seller may get long-term capital gain treatment for sale b. The transaction is simple and clean: Cash for Stock or Cash and Note Receivable for Stock c. In an asset sale the transaction may result in a gain, most of which is usually taxed at ordinary income tax rates. Purchasers usually don’t get a stepped up basis in the assets of the acquired business. However, there are certain IRS provisions which may allow a stepped up basis if certain requirements are met.

2007-11-04

Business Value Rules of Thumb: Useful or Misleading? Part III

This article is Part III of the original article which was presented in September, 2007. Part I and Part II presented the first two components of value- expected risk and expected growth rates. This brings us to a consideration of the 3rd component of value, Expected Income (or Expected Cash Flow.) Let’s assume that the level of expected risk, the expected growth rates, and all other factors for Companies A and B are the same except for the expected (future) net income or cash flow. If Company A has an expected future net income of $ 550,000. and Company B has an expected future net income of $ 400,000., a rough indication of value for each Company can be determined as follows: 1) Company A: $ 550,000. = $ 3,142,857. 20% - 2.5% 2) Company B: $ 400,000. = $ 2,285,714. 20% - 2.5% Summary: All other factors being equal, the Company that has the highest expected (future) net income (or cash flow) will have the greater indicated value. Overall Summary: Rules of thumb may sometimes be helpful in estimating a rough indication of value. However, they should never be relied upon as a final indication of value nor should they be utilized as a “stand alone” method of valuing a business. Rather, they may in certain instances, be utilized in conjunction with another method and only as a ”reasonableness check”.

2007-10-27

Webinar Announcement

Marvin T. Brown, CEO of Brown Valuation Group and Bill Black, CPA/ABV of Atlanta will present a webinar on December 13, 2007 entitled "An Overview of the new AICPA Business Valuation Standards". The webinar is sponsored by the Georgia Society of CPAs.

2007-10-15

Business Value Rules of Thumb: Useful or Misleading? Part II

This article is Part II of the original Article which was published in September. Part I of the Article presented an overview and an discussion of the 1st component of value - Expected risk. Now, let’s consider the 2nd component of value, Expected Growth Rates. Assuming the same parameters for Company A and Company B except for these facts: 1) The level of risk is the same for both companies – let’s assume a 20% capitalization rate for both companies (and that Company B is not a defendant in a lawsuit) and 2) the expected intermediate and long-term revenues growth rate for Company A and Company B are 3.8% and 2.5%, respectively. Assuming that the $ 400,000. EBITDA amount represents future expected income for both companies, we can utilize the above expected growth rates in determining a rough indication of value: 1) Company A: $ 400,000 = $ 2,469,135. 20% – 3.8% 2) Company B: $ 400,000. = $ 2,285,714. 20% - 2.5% To summarize: All other factors being equal, the company with the higher expected revenues growth rate (i.e. Company A) will likely have the greater indicated value. Part III of this Article will be published shortly.

2007-09-15

Business Value Rules of Thumb: Useful or Misleading? Part I

In determining the value of a business interest, rules of thumb, usually in the form of multiples, are often referred to and are sometimes utilized. For example, values are sometimes computed by utilizing multiples such as five times EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). Utilization of multiples such as this may assist a potential investor in determining a rough indication of value. While this multiple and other commonly utilized multiples may be helpful, it is very important to consider each of the three components of value in deriving an indication of value for a subject interest. For example, consider the 1st component of value, Expected Risk, as demonstrated in the following example: If Company A and Company B are in the same industry, if both have a current year’s EBITDA of $ 400,000. and if rules of thumb in that industry generally represent an EBITDA acquisition multiple of five times EBITDA, then both companies should have a value of $2,000,000.(5(x)= $400,000.). However, further assume that Company B is the defendant in a pending lawsuit with a customer, and the Company’s attorney has opined that the Company will likely be liable and a material judgment will be assessed against it. Of course, it logically follows that, all other factors being equal, Company A is worth more than Company B even though EBITDA is the same for both companies. In summary, Company B is more riskier than Company A, it logically follows that Company B is worth less than Company A; thus the greater the risk of a given interest, the lower the value of that interest, and vice-versa. Stay tuned for Part II to be presented in the near future.

2007-06-17

Business Value Tips

We periodically post Business Value Tips and other items of interest in this section of our website. Stay tuned for continous information about business value and other current events

2007-04-01

Financial/Legal Advisors:

Many of the inquiries that we receive for valuation services as well as requests for proposals come from CPAs, financial advisors, and attorneys who have clients with such needs. Please allow us to discuss the various types of services that we offer and your client's valuation needs with you.

2006-12-15

Marine Association Event

Marvin Brown,President and CEO of Brown Valuation Group was a featured speaker at the 2006 Kentucky/Tennessee Marina Associations annual convention in Chattanooga, Tennessee on November 14th. His program was entitled "Finding Value in Your Marina."

2006-08-28

Our Services:

Please click on the the Services/Experience tab above to view the types of services that we offer. We perform quality,professional work with prompt turnaround time. Please allow us to assist you with your valuation needs.

2006-08-11

Marine Association Event

Marvin T. Brown, CPA/ABV, President of Brown Valuation Group was a featured speaker at the South Carolina Marine Association's annual convention in Litchfield Beach, South Carolina in August.

2006-07-22

Asset Sales Vs. Stock Sales

The vast majority of small businesses and a large percentage of medium-sized businesses are sold as asset sales - that is, the buyer of a business purchases certain assets of the business instead of the common stock. Reason: A buyer is reluctant about assuming liabilities (known or unknown)which is an integral part of a stock sale. Thus, a buyer is interested in purchasing certain assets of a business, which generally consist of the inventory, fixed assets, and goodwill. Stay tuned: More on Stock purchases later.

2006-02-27

Marina Magazine Article

Marvin Brown CPA/ABV, CEO of Brown Valuation Group has completed an article entitled the Marine Industry Outlook- A Current View. This article has been published in the December, 2005 issue of Marina Dock Age Magazine. The article discusses the future economic outlook as well as challenges, trends, and opportunities for marinas, boatbuilders, and retail marine dealers.

0000-00-00

National Conference Presentation

Marvin Brown, CEO of Brown Valuation Group was a speaker at the Institute of Business Appraisers National Symposium in Chicago. His presentation is entitled "Valuation Marketing: Honing In On Success".