Business Valuation
Most business-owners are surprised to learn their business doesn’t have just one value. It has many. The one that is appropriate depends on the following variables:
The purpose of the valuation
The state in which the business is organized
Provisions in the Articles of Incorporation (for corporations) or Operating Agreements (for limited liability companies [LLCs])
Valuation-related provisions contained in an agreement between or among the owners of the business (a.k.a. ‘buy-sell agreement’)
How equity is distributed among owners
The premise of value (i.e., value to whom and under what circumstances?)
The level of value (i.e., control, marketable, marketable or non-marketable, etc.?)
The existence of more than one class of stock (e.g., preferred vs. common; Class A vs. Class B, etc.)
The level of free cash flow in the twelve months preceding the valuation date
Expected near-term growth in annual free cash flows
The risk associated with generating those expected free cash flows
The experience and competence of the professional doing the valuation