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2017-11-22 Print

Landmark Advisors Presents Business Valuation Techniques


Andrew J Thompson is an attorney with nearly 30 years of experience practicing law and expertise in business valuation techniques.

FOR IMMEDIATE RELEASE

November 22, 2017 – Andrew J Thompson, an attorney based in Indianapolis, writes on the Landmark Law Blog that it is extremely important to know the value of your business for many reasons. However, business valuation is extremely subjective, as the seller more often than not puts their business at a much higher price point than the buyer.

The author then goes on to discuss various techniques that can be utilized by business owners to discover the true value of their business. The first and simplest of these is looking at business revenues and comparing them to other businesses within the same industry. This is because businesses under an industry tend to share similar expense ratios and profitability predictions. However, this method should only be used as a short hand starting point, as businesses compete through profit and some are simply run more efficiently than others.

Mr. Thompson then discusses looking at the net assets of a business as a second short hand method. The challenging part of this technique is valuing intangible assets, such as goodwill and intellectual property. Without hiring a professional to help you evaluate the more complicated assets, asset based valuation can and has to be quite speculative, and the modern market place is full of speculative buyers and sellers.

A third method discussed by the author is using earning based formulas like EBITDA (Earnings before interest, taxes, depreciation and amortization), which accounts for adjustments to reported earnings for long term expenses and does not reflect the current state of cash or earnings flow of a business. However, formulas like this can demonstrate long term consequences of the current management of a business.

Mr. Thompson then explains that smaller, single owner businesses can instead use a formula called Seller’s Discretionary Earnings. Not only is it simple to calculate, but it also tends to yield useful estimates of what a business would be worth to a new owner of the company.

About Andrew J Thompson

Andrew J Thompson is an attorney with nearly 30 years of experience practicing law and expertise in business valuation techniques.

Contact Information:
Andrew J Thompson
Landmark Legal Services
2102 East Washington Street
Indianapolis, Indiana 46201
Website: http://www.landmark-law.com/
E-mail: andrewfla21.com
LinkedIn: https://www.linkedin.com/in/andrewjthompson/
Phone: (317) 564-4976

For more information on this press release visit:
http://www.landmark-law.com/blog/uncategorized/whats-your-business-worth-valuation-models/

 
Contact Info
Landmark Advisors
2102 East Washington Street
Indianapolis, Indiana 46201

Phone: (317) 564-4976

Website: http://www.landmark-law.com/