From new startups to decade-old enterprises, business valuation is a key aspect of not only maintaining strong financial health but also of properly tracking business growth. An in-depth company valuation provides you with key insight into financial growth and the monetary value of your current operations, both of which lead to more informed business decisions. However, a proper business valuation needs to be conducted by an independent expert to provide you with the highest value, which is where JS Morlu comes in. Our team understands the processes necessary to complete a proper valuation for all business types, from businesses in the startup phase to global companies.
What is a Business Valuation?
A business valuation is a process of assigning a monetary value to a business based on qualitative and quantitative processes. Companies decide to engage in a business appraisal for a wide variety of reasons. Among the top reasons include succession planning, personal financial planning, securing funding, and planning for a sale. Investors, lenders, and potential buyers all want to know the bottom-line number and how much profit your business produces, which is why business valuation services by JS Morlu should be on your radar. Moreover, the factors considered will vary based on business size, operating industry, and method used. However, past, current, and future earnings are almost always considered when developing an estimated business appraisal price.
What is the Importance of Corporate Valuation?
All businesses regardless of size can benefit from a corporate valuation. A business valuation firm digs deep into the factors that affect the sale price and current value of your business, giving you a monetary amount to base future business decisions off. When a corporate valuation is conducted on a regular basis, such as yearly, business owners can derive key metrics to track performance and the change in value. An estimated change in value is starkly different from a change in revenue. Many prospective buyers and lenders care more about your business value compared to the revenue you are generating.
Moreover, if you are planning on selling your business in the coming years, it will be crucial to make informed business decisions that lead to a higher value. For example, reporting a larger net income each year won’t have the same effect as increasing your asset value on the balance sheet. Understanding the different methods to improve your value will help you secure top dollar when the time comes to sell.
How Frequently Should I Have a Company Valuation?
The frequency you should complete a company valuation depends on your future financial goals. Planning on selling your business in the next year or two will require more frequent company valuations compared to if you are looking to sell in the future. In addition, business valuation services by JS Morlu aren’t only for those looking to sell their business. In fact, we work with many business owners that are working towards succession planning or securing a loan or other investor through a strong company valuation. In these cases, a company valuation would only be needed at certain times, making it important to contact an expert who understands what circumstances lead to a necessary valuation.
What Different Services Does JS Morlu Offer?
The team at JS Morlu offers a wide variety of business valuation services, allowing us to meet your every need. The services needed by one business may be vastly different from what your business needs, calling on the need to have the option to customize a service package tailored to your needs. We realize this situation frequently arises, which is why we are proud to offer the following services:
409a Valuation Startup
Startups are faced with mounting difficulties to secure funds and issue stock, leading to the need for an accurate valuation to determine critical financial data. 409a valuation startup services by JS Morlu result in an independent appraisal of the current fair market value of your startup. This is commonly used for private companies or those who are looking to issue stock to a specified set of individuals, such as founders or employees. The valuation we provide you with can be used to determine a share’s fair market value price in compliance with industry standards.
A corporate valuation is not limited to C Corporations only. Instead, all business types can benefit from corporate valuation services. Understanding the current value of your business can help you decide the next steps, such as finding a buyer, planning for retirement, or passing the baton off to the next generation. Whatever the reason, you want to be sure you have an accurate valuation number to base your decision on, which is why a certified valuation analyst, like JS Morlu, is necessary.
When it comes time to pass your business down to the next generation, you don’t want to be blindsided by your business’s value. Succession planning comes with tax implications that need to be considered, giving you time to decide on which succession method is right for your business. Selling off your business to your child can result in capital gains taxes, which can be costly. Other methods may be more favorable, which is why you want an expert in your corner weighing the tax implications of each succession method.
If succession planning isn’t in the cards for you, selling off your entire business may be a viable solution. In order to complete the business sale, your business needs to be assigned a proper monetary value to base negotiations on. An inaccurate valuation can lead to a lower sales price or an unfavorable contract. Skip this risk with a certified business valuation completed by JS Morlu.
Financial Modeling and Analytics
A large part of proper business valuation services includes financial modeling and analytics. JS Morlu can complete these services separately or in conjunction with a full company valuation, depending on your business needs. We work with you to uncover the specific needs of your business, giving us the tools necessary to put together a customized service package to include value-added modeling and analytic services. Don’t wait until the last minute to request a business valuation. Instead, work alongside JS Morlu to produce financial modeling and analytics on a regular basis.
What Business Valuation Models Does JS Morlu Use?
JS Morlu realizes that different models may yield favorable or unfavorable valuation amounts, which is why we offer our clients multiple different model calculations. The industry your business operates in, and specific financial data will determine the most favorable model. Among the list of models we frequently work with include:
The asset-based model approach analyzes balance sheet factors, including liabilities and assets, to determine a monetary value. The net assets reported on the balance sheet are subtracted from the total liabilities to assign a monetary value. This model assumes all the liabilities will need to be paid off when the company is sold with the assets being left over what the company is actually worth. This can be an unfavorable situation depending on the level of debt your business currently holds.
Discounted Cash Flow Model
Instead of analyzing certain balance sheet factors, the discounted cash flow model forecasts future cash flows and then discounts the value to arrive at the present value. Time value of money operates on the principle that $1 today will not be worth $1 in 10 years, calling on the need to discount the value. The cash flow figure analyzes revenue and certain fixed expenses for a set time period, often which is showing company growth. This model is generally favorable for growing businesses; however, if your company is sustaining a consistent cash flow loss, another model may be more beneficial.
Dividend Discount Model
The dividend discount model is another way of calculating company valuation. This model utilizes quantitative data to analyze past stock prices and project a current company value. The fair market value of the company is found by adding back past and future dividend payments and discounting the number to the present value. Business valuation firms need to properly add up current and future dividend payments to give your company the most accurate value.
Residual Income Model
The residual income model analyzes income statement factors to produce a company valuation. The opportunity cost of shareholders is added back to net income to produce residual income. This is commonly referred to as the cost of capital. Residual income can then be projected using certain factors to arrive at the current fair market value of a company. Only certain shareholder items are added back, leading to the need for a qualified expert to walk you through the process.
Why Work with JS Morlu?
Finding a company accredited in business valuation can be a difficult task, especially with regulations constantly changing. Luckily, one business valuation firm in Virginia makes the decision easy. As a team of certified valuation analysts, we have the knowledge and expertise to provide your business with an accurate and timely business valuation. Our team of certified financial modeling and valuation analysts ensures your business is receiving the proper due care and attention needed when calculating business valuations. Calculating your own company valuation opens the door to missed factors that may result in an unfavorable number.
Since we are a full-service accounting firm, our expertise goes beyond business valuation calculations. We can assist you with every step of the process through effective consulting and accurate financial statements. Working alongside an expert, like JS Morlu, gives your business the tools needed to work towards a more favorable valuation or take the next steps in succession planning or selling your business. Moreover, the team at JS Morlu understands that business decisions need to be taken quickly when an opportunity presents itself, which is why we work tirelessly to provide your business with value when you need it most.
Unlike other business valuation specialists, we pride ourselves on coming to a mutually beneficial agreement to fit your business needs. Even if you aren’t ready for a full business valuation, your business can still benefit from our financial modeling and analytic services, leading to more informed business decisions and transparency into your business’s financial health. The services we offer are flexible to fit your needs, tailoring our fees to the level of service provided as well.
All businesses can derive value from a company valuation provided by a certified expert, like JS Morlu. The team at JS Morlu focuses on your specific business needs, choosing the most favorable valuation method and talking you through any tax implications that may arise. Having a business valuation expert that also has the ability to give you qualified consulting advice separates JS Morlu from the rest. The next steps after a business valuation aren’t clear-cut, which is why we work with you through every step. Reach out to one of our team members today for a consultation.