Methods

With respect to business valuation, we use the same three approaches to value as we do for real estate, but there are some additional pieces to consider during the valuation process.

In the case of stock ownership of a publicly owned actively traded corporation, the market value of that ownership is a known quantity at a given point in time (i.e., the public market exchange price). The market values of publicly owned corporations represent the collective judgment of actual and potential buyers and sellers of a given stock.

In the case of stock ownership in a privately owned and/or inactively traded company, the market value cannot so readily rely upon the collective judgment of buyers and sellers, in a given stock, as the basis of valuation. For such companies, the accepted techniques of valuation analysis found in I.R.S. Revenue Ruling 59-60 include eight primary factors. These factors, although not all inclusive, require careful analysis:

1. Nature and history of the business
2. General economic and industry outlook
3. Book value and historic financial condition (balance sheet analysis)
4. Earning capacity (financial statement analysis)
5. Dividend paying capacity
6. Goodwill and other intangible values
7. Any sales of stock and size of the stock holding valued
8. Market prices of comparable or similar actively traded companies

In our valuation methods, we consider all of the relevant factors. Additionally, we interview the management team, visit the subject's main location, review financial statements for the past five to eight fiscal years, consider market data pertaining to the industry, and other pertinent factors which may apply to a specific appraisal analysis. Finally, each of the above methods and considerations is evaluated for reasonableness, consistency, and its relative merits in the determining the final appraised value estimate.