Know the value of your business

Bryan Browning
Managing director
Valuation Research Corp.

Business valuations
101, 25 in Milwaukee

Bryan Browning, managing director of Valuation Research Corp. in Milwaukee, is experienced in providing business valuations in a range of industries. Business owners should constantly monitor their valuations to take advantage of opportunities, he says.

“When was the last time you valued your business? In line with public market increases, recent multiples for businesses sold in most sectors have increased. In our experience, establishing a baseline valuation can be valuable and provide meaningful information to you as you seek to grow the value of your company.

“Small businesses are typically valued using one of three approaches. An income approach uses an income capitalization or a discounted cash flow methodology and considers the present value of future cash flows to estimate the value of a business. A market approach uses transactions or publicly traded valuations to develop multiples based on comparable examples. Businesses can also be valued using an asset-based approach, which breaks a company down into its pieces (inventory, equipment, real estate and in some cases, intangible assets) and values each asset and liability separately.

“A comprehensive valuation considers factors such as the history and market position of the business, strength of customer relationships, competitive threats and marketplace opportunities. Further, the impact of the industry and economy and an evaluation of risk and appropriate return are considered. Company valuations can be impacted by growth rates, interest rates, financial condition and historical operating performance, management and industry forecasts, and the size of the company and interest being valued.

“Companies can enhance value by creating an effective succession plan, diversifying sources of revenue, creating strong brands through marketing, quality service and strong name recognition, and by maintaining a reputation for disciplined financial management.

“In summary, undertaking a careful valuation process should be part of any business owner’s standard operating procedure as a useful and important business management exercise.”

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