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Lev
Lev, Tax Preparer
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Experience:  Personal Investment, Tax Preparation
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What pieces of information are required in an "indication of

Resolved Question:

What pieces of information are required in an "indication of value" for my business?

-We own some furniture & equipment I would estimate at 25k
-We have two building leases
-On one we began leasing in 8-2008 we contributed 136k to the buildout and had been taking deductions on a portion of it each year. We continue to pay the lease.
-The other the landlord built out and we just pay the lease.
-We have cash in the bank
-We have some debt
-We are 3 partners who take Salaries, only one of which is required to run the business
-Our taxes are based on a cash basis

Is any other information required? How would I determine the value?
Submitted: 8 months ago.
Category: Finance
Expert:  Lev replied 8 months ago.

That might be not a simple task to evaluate your business...

We need to look from market prospective. If you are a buyer - what would you pay for your business? - that would be the value.

Fair market value (FMV) is the price that the business would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

When the business is not sold - we need to appraise it to determine the FMV. Common valuation methods for businesses include:
Market-based valuation. - based on past experiences selling similar businesses. The broker may recommend an asking price based on the sale prices of similar businesses in the same area or industry. It is quick, inexpensive and it's common practice for the sale of small businesses.

Asset-based valuation. - based on the book value and liquidation value of the business. These are considered bare minimums in business appraisals.

Earnings-based valuation. - based on historical financial figures, including debt payments, cash flows (past, present and projected) and revenues.

All types of valuations are often combined for a more inclusive appraisal. You may use professional appraisers - http://www.allbusiness.com/buying-exiting-businesses/selling-a-business-valuations/8171-1.html

There is no easy way to appraisal a business - every business is unique and often depends on specific individuals, customers, etc. Valuation methods above are a generic approach in determining the value.

You may also use software solution - this is just an example - http://freevaluationsonline.com/

However - that will provide only a raw estimate. Just follow the procedure - and you will get a valuation report.

Lev, Tax Preparer
Category: Finance
Satisfied Customers: 22642
Experience: Personal Investment, Tax Preparation
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