There are a variety of reasons why businesses need to get a valuation. One of the most common is for SBA 7(a) loans, but they can also be used in getting other loans, or for succession planning, exit planning, and value growth. Here are three different recent business valuations we completed.
Floor Leveling – Concrete Flooring Specialty Construction Contractor Business Valuation
The team at the Art of Business Valuation, Harvest Business, LLC prepared an opinion of value for a specialty concrete floor leveling contractor where the owner was planning to sell to a key manager over a period of years. The complexity of this business valuation arose because of large variations between the cash basis tax returns and the internal accrual based financials which the parties agreed were trustworthy.
The flooring contractor was highly profitable over the review period but there were wide swings between good years and bad years. There was little growth over the period, yet the company was very consistent. Therefore, we averaged the cash flows over the period reviewed in order to project the future cash flows. Both the market method cash flow and the capitalization of earning method were used and weighted to determine the final conclusion / opinion of business value for the concrete floor leveling specialty contractor.
Liquor Store – SBA 7(a) Business Valuation
What can we say? With the pandemic, we have done a bunch of SBA 7(a) loan business valuations of liquor stores in the last year. SBA 7(a) loans for liquor stores can make sure that they have the capital they need for a changing market. Many of the stores we have evaluated are in New York and Pennsylvania. Liquor stores often are great businesses in small towns.
Home Builder & Developer — Business Valuation Opinion of Value for Gifting & Estate Planning Purposes
A home builder and developer in the Carolinas needed a business valuation to begin gifting business interests to his son. One major issue we found was that 2020 was an off-the-charts successful year for builders because the pandemic increased demand for homes (especially new homes). However, this success was not likely to be repeated in the future. For example, the company was having a hard time locating new lots to build on and high costs and low availability of construction materials were impacting future profits. Of course, this was somewhat offset by the fact that everything was selling with reduced sales expenses.
We were asked to value the home building operations and to properly discount the minority interest for lack of control and lack of marketability (DLOM) which was to be conveyed. To perform the discounting, we reviewed Restricted Stock Study Quintile Analysis combined with a Mandelbaum Review and Chaffe’s and Finnerty’s Put Option Analysis.
Each business valuation–no matter the industry or company–is an art, not a science. We bring years of experience and a complex understanding of all of the elements of business valuation. Contact us today to learn more about our business valuation services.