The Small Business Valuation Book: Easy-to-use Techniques That Will Help You. Determine a Fair Price, Negotiate Terms, Minimize Taxes

by Tuller, Lawrence W.

• ISBN13: 9781598697667
• ISBN10: 1598697668
• Edition: 2nd
• Format: Paperback
• Copyright: 2008-09-17
• Publisher: Adams Media Corp

Summary

It's a tough question that you've undoubtedly faced as a potential buyer or seller of a small business. However, it doesn't have to be. This book takes the mystery out of small business valuation so you know how much the company really costs and can make the deal that's best for you.

Author Biography

Lawrence W. Tuller is a graduate of Harvard University and the Wharton School and holds a CPA certificate

Table of Contents

Business Valuation Principles	p. 1
Exposing the Eight Myths of Business Valuations	p. 3
When Selling a Business or Applying for a Loan	p. 4
Basing Value on Earnings	p. 5
When Compared to Another Company	p. 6
Five Times Earnings	p. 6
Loss Businesses are Worthless	p. 7
Business Owners Know Best	p. 8
Two Times Revenue	p. 9
In the Eye of the Beholder	p. 9
Lack of Business Appraisal Standards	p. 10
The Basics	p. 13
Terminology	p. 15
Cash Is King	p. 21
The Business Valuation Process	p. 24
Discounting Future Returns and Other Theoretical Methods	p. 31
The Capital Market Theory	p. 32
Discounted Cash Flow	p. 34
Continuing Value	p. 46
The Excess Earnings Method	p. 48
The Asset Value Method	p. 51
Gathering Data	p. 53
Initial Due Diligence	p. 54
Accumulating and Assimilating Data	p. 57
Interviewing Management Personnel	p. 59
Internal Reports	p. 64
Contracts, Leases, Appraisals, Claims	p. 65
Economic and Industry Data	p. 67
Restructuring Financial Statements	p. 71
Receivables and Revenue Recognition	p. 72
LIFO Versus FIFO Inventory Valuation	p. 74
Leases	p. 75
Intangibles	p. 77
Pension Liability	p. 78
Purchase Accounting Adjustments	p. 79
Intercompany Pricing and Investment	p. 80
Nonrecurring Events	p. 81
Owner/Manager's Compensation and Expenses	p. 82
Impact of Inflation	p. 84
Ratio and Risk Analyses	p. 85
Debt Utilization Ratios	p. 89
Liquidity Ratios	p. 90
Profitability Ratios	p. 91
Asset Utilization Ratios	p. 93
Risk Analysis	p. 96
Qualitative Valuation Measures	p. 101
A Cash Flow Forecasting Model	p. 105
Economic and Business Assumptions	p. 106
Sales Forecast	p. 107
Purchased Materials Forecast	p. 109
Direct Labor Forecast	p. 110
Cost/Sales/Asset Functional Relationships	p. 111
Inventory Forecast	p. 113
Operating Expenses Forecast	p. 114
Statement of Income Forecast	p. 118
Balance Sheet Forecast	p. 120
Cash Flow Forecast	p. 123
Putting It All Together	p. 127
Ratio and Risk Analysis	p. 133
Evaluation of Qualitative Factors	p. 138
Choosing a Capitalization Rate	p. 139
Discounting Cash Flow to Debtholders	p. 142
Calculation of Continuing Value	p. 143
The Final Calculation	p. 144
Conducting Research on the Internet	p. 147
Using the Internet for Comparative Analysis	p. 147
North American Industry Classification System	p. 149
Sources of Government Data	p. 150
Sources of Publicly Traded Company Data	p. 151
Sources of Data for Privately Held Companies	p. 153
Buy/Sell Data	p. 155
Internet Addresses	p. 157
Valuations for Special Situations	p. 159
Minority Interests	p. 161
Pro Rata Share of Total Business Value	p. 163
Minority Interest Discount	p. 164
Separate Calculation for the Present Value of Minority Benefits	p. 166
Minority Interests in Micro Businesses	p. 169
Debt Securities	p. 171
Reasons for Valuing Debt Securities	p. 172
Fundamentals of Debt Valuation	p. 174
Defaulted Debt Obligations	p. 183
Sale/Leaseback of Hard Assets	p. 186
Securitization	p. 188
Buyout Agreements	p. 191
Valuation Theory	p. 193
Independent Appraisals	p. 196
Negotiating a Value	p. 197
Repurchase Agreement Funding and Terms	p. 198
Cross-Purchase Agreements	p. 203
Multibusinesses	p. 209
Defining and Collecting Data by Business Segment	p. 210
Business Segment Pro Forma Forecasts	p. 212
Corporate Office Cost Center	p. 216
Present Value Comparisons by Business Segment	p. 220
Consolidated Valuation	p. 227
Valuations for Special Types of Companies	p. 231
Micro Businesses	p. 233
Valuation Alternatives	p. 234
Reconstructing Cash Flows and Asset Values	p. 244
Valuation Effects of Stock or Asset Sale	p. 246
Valuing Deferred Payments	p. 247
Professional Practices and Personal Service Companies	p. 251
The Uniqueness of Professional Practices and Personal Service Companies	p. 252
Goodwill	p. 254
Measuring Goodwill	p. 256
Financial Analysis	p. 257
Valuation Calculations	p. 262
Real Estate-Based Businesses	p. 267
Market and Competitive Factors	p. 268
Competitive Analysis	p. 272
Forecasting Market Share and Occupancy	p. 275
Forecasting Average Room Rate per Occupied Room	p. 279
Forecasting Expenses	p. 280
Income Capitalization Valuation	p. 282
Internal Rate of Return Method	p. 284
Start-Up Businesses	p. 289
Valuing Ideas	p. 290
Three Value-Building Criteria	p. 291
Building a Customer Base	p. 293
Trade Shows	p. 294
Publicity	p. 295
Advertising	p. 296
Calculating Business Value	p. 297
Conclusion	p. 299
Index	p. 301
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