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Business Valuations
and a Broker’s
Opinion of Value

What is a Business Valuation

A valuation is a structured process in which a trained professional determines the value of an asset to facilitate a financial transaction for business or personal purposes.

Reasons to Obtain a Valuation

Valuations are typically done for a number of purposes including: divorce, estate and gift, financing, litigation, buy sell agreements, condemnation, buying or selling a business, etc.

How is The Value of a Business Completed

Frazier Capital first obtains the financials of the company.  Next, we ask a number of questions.  Some of these questions are based upon the sales strategy of the business, how the business obtains sales, the financial analysis of the business, whether they own or rent their building, employee backgrounds, trends in the industry, etc. We finally look at valuation trends in the industry and whether the industry is trending upwards or downwards.  We finally obtain a range of value for the company that we are looking at.

 

What is The difference Between a Valuation and Broker’s Opinion of Value

Generally, a valuation or appraisal is an opinion based upon an analysis of the business’ financial statements, strengths, weaknesses and comparable sales and discount rates in the market.  This valuation is typically held to a higher standard than a broker opinion of value. These are typically third party opinions, and are typically USPAP and/or IRS compliant.

On the other hand, a broker opinion does not take as much work and typically is not held in as high a standard as a valuation. In addition, there is typically more of a range of value for a broker opinion.

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