Your Unbiased Business Valuation in New York

Why Use Us for Your New York Business Valuation?

Nielsen Valuation Group believes in providing fair market business valuations that reflect real world transactions. This is in contrast to purely theoretical calculations using predetermined formulas, oversimplifications, or pure speculation, if you will.

Our approach reflects the spirit of the Internal Revenue Service (IRS) Revenue Ruling 59-60, which we fully comply with.

We believe that whatever the purpose of the valuation, the goal is to find a credible market value, not just a “value on paper”.

In the following paragraphs, we explain in more detail how we accomplish this.

Fair Market Value & IRS Revenue Ruling 59-60

Business valuation firms use a variety of methods to value businesses. Surprisingly few follow the guidelines outlined in IRS Revenue Ruling 59-60.

This ruling makes a lot of sense to us. Not only because it is an authoritative and trustworthy source, but also because it reflects how real market transactions work.

Fair market value is the price at which a hypothetical buyer and seller are willing to agree. Any valuation that is set higher or lower than fair market value is of little use.

The ruling makes some important points to consider when valuing a business. For example:

• Pre-determined formulas cannot be used to calculate the value of a business
• Standardized tables of capitalization rates can be misleading
• It is important to consider actual risks, the irregularity or stability of earnings, and the nature of the business

When we perform a New York business valuation, we uncover what is happening in the business. We look at its track record, its current situation, we analyze its earnings, its risks, its ownership structure and its prospects. We do not simply plug numbers from the books into a formula.

We Start by Normalizing the Financial Statements

The calculations of a business appraisal are relatively quick. What takes time is the preparation. We can compare it to the prep work in a paint shop. The calculations in a valuation are like applying the paint.

Normalizing the financial statements means two things:

• The balance sheet contains the book value of assets and liabilities. For a valuation, however, we need to know the market value. So the balance sheet needs to be adjusted to reflect the market value of the assets. Sometimes the liabilities also need to be adjusted.
• Income statements show income and expenses. However, they cannot be taken at face value in a valuation. For example, there may be one-time expenses or income, or the business may have paid for the owner’s personal expenses.

Once the balance sheet and income statements have been normalized, we have a clean starting point for our business valuation to determine the fair market value of the business.

The Art of Selecting Valuation Approaches

Every business valuation uses one or more valuation approaches. This is not the same as using predefined formulas. We do not use formulas. Instead, we select relevant approaches and apply them to the business in question and with regard to the purpose of the valuation.

The following approaches may be used:

• Market approach: Looks at what similar businesses in the same niche have sold for in New York.
• Asset approach: Valuation based on the net asset value of the company’s assets after deducting liabilities.
• Income approach: An analysis of the value of the business based on its earnings or cash flow.

We often use a combination of the asset approach and then the income approach to provide a robust valuation that reflects true market prices.

Sometimes we apply discount rates, for example when valuing a distressed company or a company in liquidation. In doing so, we never use theoretical assumptions, but rather look at the general practice in the market.

With Us Your New York Business Valuation is Always Customized

When you hire Nielsen Valuation Group for a business valuation in New York, you get a 100% customized report. The type of business, its size and situation, and the purpose of the valuation all affect how we prepare the report.

To make sure you get what you need and don’t overpay for what you don’t need, we offer a free 30-minute consultation. During our meeting, you will have the opportunity to briefly present the business in question and tell us why you need a valuation.

What is My New York Business Worth?

If you are looking to sell your business in New York and need a business valuation to set the price, remember that value is what someone is willing to pay.

We are aware that there are many valuation firms that provide purely theoretical values. Such valuations will not help you find a buyer.

Instead, what we do is determine the fair market value of the business, its likely price in an open and free market.

When we talk and meet with sellers of businesses, we often encounter two misconceptions:

• One is about potential. Sellers often want to be paid for untapped potential. Buyers, on the other hand, will not pay for potential because any future value will be the result of their work and risk-taking.
• The other misconception is about long-term risk versus value. Many entrepreneurs, especially startups, suffer from survivorship bias. When they look at success stories like Alphabet, Tesla, Meta or Uber, they point out to investors that their company is likely to follow the same path. However, investors who have seen many similar cases know that only about 10% of startups survive in the long run, which affects how much they can offer for shares in the company.

In both situations, you as a seller will benefit from an unbiased and independent business valuation based on fair market value.

In this illustration, we have illustrated the concept of survivorship bias and how it was originally coined. The term comes from World War II, when analysts looked at the damage on returning planes to decide where to reinforce them. Since there was no damage to the cockpit or engines, they incorrectly concluded that these areas did not need strengthening. The reality was that planes hit in those areas never returned. The conclusions were based on survivors.

Let Us Help You with Your Business Valuation

Nielsen Valuation Group delivers unbiased, IRS RR 59-60 compliant business valuations in New York, grounded in real-world transactions. Contact us today for a free 30-minute meeting.

FAQ – Frequently Asked Questions