In this interview with Mr. Joshua Johnson, a senior valuation analyst at Shenehon Company, we have the pleasure of discussing some very important topics that all business owners should familiarize themselves with before selling their business. Mr. Johnson has valued hundreds of holding companies and family-owned businesses. Today, Mr. Johnson explains the difference between an appraisal and a valuation and discusses how an appraisal works, including what types of property can be appraised.
Key Points from our Conversation
- An appraisal is the assignment of value to tangible assets such as equipment and real estate. A valuation is the assignment of value to intangible assets such as a business interest or intellectual property.
- Essentially, all property, whether tangible or intangible (IP is considered intangible property), derives or provides some kind of economic benefit to its owner.
- A valuation figure for a relatively mature and stable business could nevertheless be considered “good” for three months, again, barring any unforeseen events that would materially impact operations. With newer businesses and start-ups, this is not the case, and the value could change in as little as a week or a month.
- Without knowing the specifics of your company or location, it would be difficult to gauge how long it would take to sell relative to the average.
- Nearly every business has one or two major items/categories that drive the value of the company in one direction or the other.