TOOLS

A fellow researcher and I were discussing our need to learn more about business valuation. We have been researching more and more small business owners and were not having much luck developing comparable values from public company data. Although researchers don't have access to all the information needed to do a formal valuation, the articles below can give some insight into how valuation is done and what factors are considered. There are even some multipliers for doing quick and easy valuations. If you have been wishing you had learned more about business finance in school and less about your major, read on.

CONTENTS:

• International Glossary of Business Valuation Terms
• Business Valuation and Finance Glossary
• Small Business Valuation Glossary
• Valuing Small Businesses: What is Yours Worth?
• Valuation Rules of Thumb
• Valuing a Business for Sale and Other Issues
• Value a Business
• Some Common Valuation Methods
• Valuation Training for Appeals Officers
• Valuation

INTERNATIONAL GLOSSARY OF BUSINESS VALUATION TERMS

The American Institute of Certified Public Accountants provides this extensive dictionary. Some of the terms are linked to other terms. You may need a dictionary for the dictionary, but they have covered all the relevant terms.

http://bvfls.aicpa.org/Resources/Business+Valuation/Tools+and+Aids/Definitions+and+Terms/
International+Glossary+of+Business+Valuation+Terms.htm

BUSINESS VALUATION AND FINANCE GLOSSARY

Strategic Valuation Associates provides a less extensive but plain English valuation reference.

http://www.strategicvaluationassociates.com/glossary.asp

SMALL BUSINESS VALUATION GLOSSARY

ValuAdder has another less complete but easier to understand glossary, with cross-referenced links and examples.

http://www.valuadder.com/glossary/index.html

VALUING SMALL BUSINESSES: WHAT IS YOURS WORTH?

Jeff Jones, co-editor of the Handbook of Business Valuation, explains some basic concepts for business sellers, including valuation concepts, factors affecting value and three different valuation methods and the methods within the methods.

http://www.certifiedappraisers.com/BussValue2.html

VALUATION RULES OF THUMB

Certified Business Appraiser Ben Cooper gives an overview of valuation considerations. The multiplier he discusses requires that you have an estimate of businesses earnings to determine value. The article makes brief mention of some circumstances that can affect value and how to consider assets and inventory. He sums up by saying that there is no certainty that a valuation calculation is correct (sound familiar?).

http://www.bizbuysell.com/guide/s_value_1.htm

VALUING A BUSINESS FOR SALE AND OTHER ISSUES

Business broker and author Russell Brown's article is valuable because it has a long list of Skeletons in the Closet. These are the bone-rattling negatives to take into consideration when determining business value.

http://businessbookpress.com/articles/article109.htm

VALUE A BUSINESS

Here is a simple list of multipliers, based on business circumstances, for determining business value. Other articles warn against using such simplistic methods, but hey, when you can't get what you need easily and quickly to do a valuation, you do what you can to get the job done.

http://www.businesstown.com/valuing/guideline.asp

SOME COMMON VALUATION METHODS

Small Business Notes provides overviews of many valuation methods. You will need to understand how valuation works to understand the explanations. The methods used in various industries are noted, which is helpful because the method reveals what it is about a business that gives it saleable value.

http://www.smallbusinessnotes.com/financing/valuationmethods.html

VALUATION TRAINING FOR APPEALS OFFICERS

This is the actual course book that IRS appeals officers receive as part of their training. It's long, it's boring, it's technical, and some of it may be over your head, but it has some helpful nuggets, if you want to put on your miner's hat and grab your pick. But get your boss to spring for a double shot latte first.

http://www.bvresources.com/FreeDownloads/irs.training.pdf

VALUATION

For researchers who know what the math symbol ∑ means and really get into doing intricate calculations, try this article by Aswath Damodaran, a professor of finance at New York University's Leonard N. Stern School of Business.

http://pages.stern.nyu.edu/~adamodar/pdfiles/ovhds/ch12.pdf

Chris Mildner

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