Business Valuation

By Shawn Hyde, International Society of Business Appraisers (ISBA) –

I had a conversation with an SBDC consultant recently, about transaction databases and how to best utilize an analysis of that data when valuing a business. She suggested I share this information with her colleagues in the America’s SBDC network, so here it is.

There are several different databases, each maintained by different organizations, that track transactions of privately held businesses — the prices they sold for as well as various other financial metrics for each transaction. The idea behind these databases is that one could analyze transactions of similar businesses that have sold, in order to identify an indication of value for a business. But there is more to it than simply pulling up the data for the applicable SIC or NAICS code and calculating the average or median of the data provided. (more…)

By Shawn Hyde, International Society of Business Appraisers (ISBA) –

Take a look at your thumb. Now compare your thumb to another person’s thumb. There are differences in size, shape, manicure, strength, and flexibility between these two thumbs. Remember this comparison, as we will come back to it at the end of this article.

A Rule of Thumb is a brief measurement, typically based on a specific part of the operations of a business, such as revenues or some other easily calculated income stream, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). The application of a rule of thumb includes some basic math, usually multiplying the selected source of income by a range of numbers.

Each industry, or type of business, usually has three or more different valuation rules of thumb that could potentially be applied to it. This means there are literally thousands of different rules of thumb that are available to provide indications of value for different types of businesses.  (more…)

By Shawn Hyde, International Society of Business Appraisers (ISBA) –

Publicly traded companies are valued every day on the stock market. But how do private business owners determine what a fair price is to buy out their partners? At what price they should sell their company? What’s the value of a 10% ownership interest in their company for gifting purposes?

The International Society of Business Appraisers (ISBA), www.intlBCA.com, exists to teach people how to answer these and other questions relating to the values of small businesses. Appraising privately held businesses involves logical thinking, financial analysis, and a healthy dose of practicality. (more…)