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Valuing a Business

-  For estate and gift tax purposes, an ideal valuation is one that's as low as possible, to minimize tax liabilities. Expect the appraiser to look for any documentable factor that might lower your company's value.


-   For sale purposes, well-prepared sellers equip themselves with a valuation that documents the highest possible value.


-   For financing purposes, bankers will look for a valuation that focuses on liquidation value rather than a company's prospects as a going concern.


-   For litigation purposes, valuations are a dog-eat-dog business. Set your valuation goals according to the side of the case you're on, but remember that the best investment you can make is a comprehensive, fully defensible document from the most blue-chip appraiser you can afford.

Helpful Articles on Valuing a Business:

What Is Your Business Worth  |Link|
Like other articles on the subject, this one warns that there's no cut-and-dried answer to the title question. However, a couple of traditional formulas can still be used to value small businesses, especially in the traditional economy. Two bases, plus a list of positive and negative factors that affect the multipliers, are suggested here. And there's more advice about selling a business on the rest of this Web site.

Determining Your Value  |Link|
Business valuation is more of an art than a science, and the way to determine any one company's value will depend on whether the owners are approaching private investors, venture capitalists, institutional investors or the public in an IPO. According to this article, if you're looking for capital, you should first figure out the amount of money you want to raise and the amount of equity you are willing to yield. In addition to explaining the general outlines of this process, the article suggests books that will help you make the right decisions.
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Company Valuation  |Link|
You've built a successful business, and now youíre thinking about selling it. How do you determine a the price? This article provides sophisticated, detailed advice about business valuation, discussing approaches that focus on excess earnings, capitalized earnings, cash flow, tangible assets, and so forth. A hypothetical example illustrates each explanation.

Business Valuation Analysis  |Link|
How to make sure independent appraisals are right on the money. 



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