Valuation FAQs

When do I need a valuation?
It’s a good time to consider a valuation whenever you need an objective opinion about the value of a business. For example, if you are thinking about buying or selling a business, you probably need a valuation. If you are in a partnership and there is a buy-sell issue between the owners, that’s another good time for a valuation. Some companies get a valuation to establish a baseline value as part of their exit planning or before they embark on a value enhancement engagement. Then they can monitor their performance with periodic valuation updates.

What is the difference between a business valuation and a business appraisal?
There is no difference, the terms are interchangeable.

For what types of businesses does Austin Dale Group prepare valuations?  

  • Stand-alone businesses up to $75 million revenue
  • Entire businesses and fractional interests
  • Subsidiaries, divisions, profit centers and reporting units
  • Corporations, limited liability companies, partnerships, and sole proprietorships

Our experience and research capabilities allow us to value almost any type of business. We have extensive experience in the technology sectors, including IT software and services, cloud computing, and engineering and environmental services.

What’s unique about technology company valuations?

The accurate valuation of a technology business often requires detailed industry knowledge and experience. Revenues and earnings are just part of the story. We have extensive experience with technology company valuations, including newer business models such as cloud, software as a service (SaaS), and IT managed services . Growth, scalability, recurring revenue, and intellectual property are some of the key factors that drive higher valuations in these markets.

My partner wants to buy me out.  Can you value my ownership interest?
Yes. We’d start with your buy-sell or shareholder agreement which specifies how ownership interests in a private company are valued and transferred. If you don’t have an agreement in place we can still value the fractional interests but the partners will have to agree on the standard of value.

What is a Standard of Value?

The Standard of Value is a set of basic instructions from the client to the appraiser. Their instructions guide the appraiser to produce a valuation report aimed at the target audience. The most common standards are Fair Market Value, Fair Value, and Investment Value.

What is a business valuation “approach”?
An approach is a general way of determining the value of a business, using one or more business valuation methods. The major approaches are the Income Approach, the Market Approach, and the Asset Approach.

The Income Approach considers the earnings capacity of a company and uses methods that convert anticipated financial benefits into a present value. The market approach uses methods that compare the company to similar businesses that have been sold. The asset approach uses methods based on the value of the underlying assets of the business. The appraiser will select the approaches to incorporate into the value conclusion in order to provide the best fit for the company and the circumstances.

Why are minority interests less valuable than majority interests?  
A majority interest in a company is more valuable than a minority interest because the majority interest is a controlling interest. The majority owner can direct strategy, operations, and investments, and set policy, compensation, and cash distributions. Naturally buyers and investors will pay more for the benefits that go with owning a controlling interest.

What is a Discount for Lack of Marketability?
Private company stock is not liquid like public company securities which can be converted to cash within a few days. This lack of liquidity and the relative difficulty of selling part of a closely held business affects its value. The relative Discount for Lack of Marketability (DLOM) will depend on the facts and circumstances of the shares being valued.

What drives the cost of a business valuation?
The cost of a valuation depends on the time and expenses involved. Hence a complete business appraisal costs more than other types of valuation reports because it takes more time to prepare. In many cases a calculation of value is sufficient and we can prepare that at a lower cost than a complete appraisal. After our initial conversation we’ll be able to make a recommendation.

How long does a business valuation usually take? 
Our business valuations generally take about three weeks after we receive your information. The actual time may vary depending on the complexity of the business, the availability and accuracy of information, and other factors.