Private Business Valuations
Market Value Justification
There are a number of reasons why business owners need to know the value of their business:
- Business buying or selling transactions
- Partner buy-in or buyout
- Buy-sell agreement preparation and reviews
- Succession and estate planning
- Legal disputes
- Business expansion, merger and acquisition financing
- Management information purposes
Private companies who issue non-publicly traded stock are faced with valuation challenges that do not impact publicly-traded stock companies. These owners often find it difficult to determine a readily available market value for their stock.
At LATP, we measure the fair value of privately held stock by looking at its earning record, growth rate, and internal rate of return. We employ methods that focus on both Income and Asset approaches when applicable. And our measurement tools are designed to estimate an amount a reasonable buyer would pay a reasonable seller. Our measurement tools include:
At LATP, we measure the fair value of privately held stock by looking at its earning record, growth rate, and internal rate of return. We employ methods that focus on both Income and Asset approaches when applicable. And our measurement tools are designed to estimate an amount a reasonable buyer would pay a reasonable seller. Our measurement tools include:
- Discounted Cash Flows
- Capitalized Excess Earnings
- Market Comps
- Multiple of discretionary earnings
- Capitalized Earnings
Although there are many valid ways to assess a private company's net worth, the practice of business valuation is not an exact science. That's because valuation methods are merely based on a series of assumptions and estimates. Moreover, there may be certain infrequent one-time events that impact a company's valuation. These types of circumstances are often hard to factor in and generally require more reliability.