Business Valuations

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Finsolve Accounting & Tax Solutions provides a service to clients who require a valuation of their business.

There are a number of instances when you may need to determine the market value of a business:

  • verification of your worth for lenders or investors,
  • purchase or sale of a business (company, close corporation, partnership or sole proprietorship),
  • shareholder agreements requiring a valuation on a trigger event
  • divorce settlement
  • moving assets into or out of a trust
  • simply knowing what the value of your business is at any given time

You will receive a written report with your valuation of your business, which will include an analysis of your businesses strengths and weaknesses and the industry competitiveness, in order to justify valuation range.

We use latest methodologies for valuation, utilising valuation standards which are mandatory in the USA.

We look to valuing your business based on future cash flows and not historic outdated multiples. In valuing your business, we apply a minimum of two methodologies, covering:

  1. Cost / Asset Value approach
  2. Income / Future benefits approach
  3. Market Approach

The process:

  1. Written questions and answers around your business and industry
  2. Written draft valuation for your review
  3. Meeting (virtual or physical) to discuss and refine the draft valuation
  4. Final report and discussion.
  5. Ongoing support and advice.
  6. Discussions will be conducted in a non technical manner (although the subject matter is technical) enabling you as the business owner to engage with prospective buyers.

Fees: available on request:

  1. Business valuation lite: internal use such as determining value for employee equity participation and shareholder agreements.
  2. Business valuation: full report for external use : SARS, Purchases / sellers , estate planning etc
  3. Shareholder agreement with valuation clause
Sample Valuation Report Shareholder Agreements Summary Business Valuation Lite Shareholder Agreements Summary

Questionnaires:

Valuation Questionnaire Valuation Questionnaire Lite

Please note that a 50% deposit of the above fees is payable before work commenced. If the valuation process is delayed, we reserve the right to invoice progress payments.

Other terms:

  • All invoices are payable 7 days from date of invoice.
  • If more than one business unit is to be valued, additional valuations will be charged at a discounted fee 30%.
  • If reoccurring valuations are required (annually or bi-annually), the valuation is discounted at 30%.
  • Negotiating of deals is subject to additional fees, including legal costs incurred, if required.

1.       Cost or asset approach:

A. The asset-based approach is a general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods based on the value of the assets net of liabilities.

B. In business valuation, the asset-based approach may be analogous to the cost approach of other appraisal disciplines.

C. Assets, liabilities and equity relate to a business that is an operating company, a holding company, or a combination thereof (a mixed business).

  1. An operating company is a business that conducts an economic activity by generating and selling, or trading in a product or service.
  2. A holding company is a business that derives its revenues from a return on its assets, which may include operating companies and/or other businesses.
  3. The asset-based approach should be considered in valuations conducted at the enterprise level and involving:
  • An investment or real estate holding company
  • A business appraised on a basis other than as a going concern.

Valuations of particular ownership interests in an enterprise may or may not require the use of the asset based approach.

D. The asset-based approach should not be the sole appraisal approach used in assignments relating to operating companies appraised as going concerns unless this approach is customarily used by sellers and buyers. In such cases, the appraiser must support the selection of this approach.

2.       Income / future benefits approach:

A. The income approach is a general way of determining a value indication of a business, business ownership interest, security, or intangible asset by using one or more methods through which anticipated benefits are converted into value.

B. Both capitalization of benefits methods and discounted future benefits methods are acceptable.

  1. In capitalization of benefits methods, a representative benefit level is divided or multiplied by an appropriate capitalization factor to convert the benefit to value.
  2. In discounted future benefits methods, benefits are estimated for each of several future periods. These benefits are converted to value by applying an appropriate discount rate and using present value procedures.

3.       Market approach

The market approach is a general way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold.