Exeter Business Valuations: The Reality of the California Real Estate Market

Business Valuation Services

What's Your Business Really Worth?

Business owners and executives frequently make best-guess business valuation estimates of their business's or asset's value based on rule of thumb...book value...or an old appraisal report. Relying on these informal outdated measures of business valuation can lead to inaccurate values and costly mistakes. They may over look intangible values and/or discounts.

Whether you are selling or buying a business, planning your estate or settling a contract dispute, involved in a divorce or no court divorce, or eminent domain proceeding, it is critical to have a sound, professional certified business valuations from a firm that will stand behind its conclusions.

Lenders, insurers, the courts, and government agencies are increasingly insisting on expert business valuations to support claims where value is concerned.

I specialize in working with individuals and owner-operated businesses. As a Certified Public Accountant, I understand the unique financial management and tax needs you face. As a business advisor, I offer you a comprehensive scope of services. My professional approach combines tax, financing, business valuation, systems, financial management and accounting and auditing expertise. This approach, combined with dedication to quality, provides an exceptional level of credibility to the valuations.

Integrity

Independence

Some attorneys try to influence the Valuator to benefit their client. Mr. Exeter does not let them influence him. His opinion is based on the facts of the case and taking into consideration the rules of the business valuation associations, court cases and the rules of the Internal Revenue Service. Mr. Exeter does all the work himself, because it is easier to understand the business or profession. He can understand any risk and what discounts or premiums are appropriate. He does not rely on statistics of other companies that he knows nothing about. The statistics are usually two or three years old. Mr. Exeter prefers to use current information. When there are partial years involved, some valuations software annualizes the year because the software only uses full years. This may not be appropriate with the way the economy is presently. Mr. Exeter understands how the software makes the computations and does the computations manually without annualizing the year.

Knowledgeable

As a CPA and 28 years with the Internal Revenue Service, he understands all types of tax returns and financial statements. He knows if creative accounting has been used in preparing tax returns and financial statements. He keeps current on his education including court case and changes in valuations rules. He wrote the audit program for large case audits used by the Internal Revenue Service. Mr. Exeter has valued several medical practices, estate and gift tax, divorce and buy and sell engagements and understands the problems and court cases involved in these valuations.

Fraud Experience

He has 28 years experience in fraud with the Internal Revenue Service. He worked in organized crime while in the IRS. During his 12 years in his own tax and accounting office and 12 years doing Certified Business Valuations, he has uncovered tax fraud, audit fraud and creative accounting schemes. He has uncovered Ponzi schemes and other criminal acts. It is important to understand fraud schemes because if there is fraud in the tax returns and financial statements, the valuation report may not be valid. He also understands when tax returns and financial statements are not prepared correct, which may affect the net profit and the valuation results.

NACVA Certified

The National Association of Certified Valuation Analysts certifies only Certified Public Accountants who also belong to a State CPA Society or the American Institute of Certified Public Accountants. The member must comply with the educational requirements of those associations as well as those of NACVA. The member must also comply with the standards and rules of those associations as well as the standards and rules of NACVA.

Prior to becoming a Certified Valuation Analyst (CVA) the member must successfully complete a rigorous training and testing process. Accreditation is a statement to the business, professional and legal community that the person has attained a level of knowledge in business valuations considered exemplary and worthy of recognition by this association.

Many consider CVA’s who are also CPA’s to be the most qualified group of consultants to provide independent business and intangible asset valuation services. A background in tax, auditing, accounting, and financial analysis, along with specialized knowledge in business valuations prepares the CPA, CVA to effectively manage the intricate complexities inherent in businessvaluations.

The CVA professional is qualified to provide business valuation services to:

Attorneys
Business Brokers
Business Owners
Financial Institutions
Financial Planners
Insurance Companies
Investment Bankers
Judges
Real Estate Appraisers
Banks or Trust Companies

Monday, September 28, 2009

The Reality of the California Real Estate Market

The Reality of the California Real Estate Market:

Siftings from the Tea Leaves of a Demographic Guru Webinar

Click here to view other upcoming webinars in The Exeter Edge™ Webinar Series.

Go To Webinar Registrations Are Required
Click here to register for this webinar on the California real estate market.

Confused About What To Do Next in Real Estate?
The "Great Recession" has left many of us scratching our heads and wondering what's next? Where do we go from here? How should we reposition our real estate portfolio going forward now that we are emerging from recession? Should I hang tight, or make an investment move now?

We realize these are confusing times, which is why Exeter 1031 Exchange Services, LLC is hosting this webinar for you. Our goal is to provide you with up-to-date real estate market data and information so that you can make better informed investment decisions.

"The Nation of California: An Almost Flat Line in 2009"
This exciting webinar will provide an update on the California real estate market and an overview of certain demographic trends that will affect investment property in the California real estate market. It will help you answer the above questions, and help you decide how to position your own investment portfolio as we move forward beyond the recession.

Hosted by:

William L. Exeter
President and Chief Executive Officer
Exeter 1031 Exchange Services, LLC

Presented by:

Alan N. Nevin
Director of Economic Research
MarketPointe Realty Advisors

Date and Time

Thursday, October 1, 2009
8:55 AM PDT Login
9:00 AM — 10:00 AM PDT Webinar

Go To Webinar Registrations Are Required
Click here to register for this webinar about demographic trends in California.

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About Me

Eminent Domain or Condemnation

In condemnations do you or the Government Agencies really know what the value of a business, asset or property is worth? Are values of locations, leases, and other intangibles taken into account? A Certified Valuation Analyst can determine these values.

In case a government agency acquires your property by way of eminent domain, the business may be entitled to damages for disruption of business or reduction in business because of the relocation. A valuation may be needed at the time of the eminent domain proceeding and at a later date to determine the loss due to relocation of the business. If the business is unable to relocate then the government agency may be liable for the value of the business. This would be true whether the business owns the real estate or whether there is a lease involved.

Selling a Business

In the case of a sale to an outside party, proper knowledge of a realistic valuation for the business is essential before the search for a buyer is launched.

Serious damage can result when a business is marketed for sale and the owner has an unrealistically high expectation of an appropriate sales price. Once the word that the company is for sale reaches the street, many harmful things can occur such as employee abandonment, insider theft, and reduced production. If the business does not sell because of an impractical estimation of the worth, the company may be left with a depleted, poorly producing organization. In addition, a business valuator will reflect the various intangibles and other correct values. Otherwise, purchasers may just look at the financial statement and think that is all the business is worth.

Buying a Business

As everyone knows, the profits of a business carry most owners on a financial and emotional roller coaster. When purchasing a business, a thorough review of the financial history must obviously be made. However, a more important process that should be conducted is in ascertaining the true earnings capacity of the subject business. A valuation analyst will be able to identify items, particular to that company, which affects its ability to make money. A business valuator can help against a misguided, emotionally based purchase decision that could bring more headaches than profits. The "Golden Rule" for purchasing a business is "no deal is better than a bad deal".

It is better to obtain the financial statements and tax returns for a minimum of five years and more if possible. Many times financial statements may be adjusted in anticipation of selling the business. The more years of financial statements and tax returns available will help determine if adjustments need to be made in the analysis.

Buy/Sell Agreements

The prudent rule prior to entering a business is to establish a formal agreement for getting out of the business relationship. Buy and sell agreements allow the business owner to transfer an interest in the business to other owners or to the business itself. The agreement can guarantee a buyer for the business and eliminate difficulties associated with transferring the business upon death or disability of one or more of the owners. Conflicts among interested parties to the business may be minimized by clearly establishing the definition of market value prior to the time of need. The value of a company changes from time to time because of the economy and the prevalent industry trends. A buy-sell agreement that is structured through a set formula of value will consistently produce an accurate determination of goodwill. Goodwill is a critical material element of the total true value of the company or business.

Valuation for Financing

Valuations frequently arise when attempting to secure financing or when renegotiating a current obligation. Business valuations include a determination of the value of tangible assets and intangible assets. Tangible assets may include buildings, land, equipment, inventory or receivables. Intangibles may include goodwill, customer lists, trademarks, non-compete agreements, patents, or leaseholds, to name a few. Determining the market value of the company’s capital assets will help determine the ability of the business to cover its current obligations and/or projected future debt.

Divorce Valuations

State law provides the effective date. The valuation is not based on future income methods. State law may or may not provide for marketability discounts.

Marital dissolution is a major force in determining the need for business valuations. Many cases involving divorce will require a business valuation for each marital partner. Determining an accurate assessment of value may minimize the need for litigation. If litigation is required, a variety of valuation issues must be considered. Issues include intrinsic value versus fair value, personal goodwill, fair and reasonable owner’s salary, discounts and premiums for minority versus control positions, and lack of marketability to sell the business.

In addition, the valuator may have to determine how the business was held – community property, separate property or some other way. A prenuptial agreement would have to be considered. If the business was started prior to marriage, it may have to be valued at the beginning of the marriage and upon dissolution. In addition, pension, profit sharing and stock ownership plans may have to be valued.

Valuations for Estate and Gift Taxes

Estate and gift tax issues are becoming more complex. Unlike some circumstances, whereby objective opinions of value are desirable but not required, valuations for these tax filings are mandatory. The primary reason is that market value is the basis upon which tax and penalties are applied. The third party in the scenario is the Internal Revenue Service. It is difficult enough to oppose the IRS. Use of an independent business valuator should minimize the risks of challenge and maximize the probability of a successful defense. This issue is compounded with gifting of closely held stock, family limited partnerships, or charitable contributions. For charitable donations or estate tax returns, it is important that the assets be appraised or valued by persons certified as specialists in the particular type of property.

Estimating the value of the assets, which will ultimately be transferred to your estate, is an essential element of proper estate planning. A valuation of your company or business will help you project your estate’s gross value and, therefore, your ultimate estate tax.

Litigation Support

The most important event in business litigation is the deposition of a witness. Most cases settle after this discovery process, based on assessments of the quality and demeanor of each witness. In addition to the expert testimony, the valuator should assist counsel in preparing to depose the opponent’s witness. This would include areas to probe for weakness in approaches to valuation, reputation of the witness, data used or not used and specifics about the analytical process. The expert witness should answer only questions asked, be directly to the point and do not antagonize the opposing attorney. An expert witness can be helpful in the following disputes:

Disruption of Business
Dissenting Shareholder Actions
Divorce
Economic Loss Analysis
Eminent Domain
Mediation and Arbitration
Partner Disputes
Wrongful Death

Insurance Claims

There are many things that can create insurance claims involving your business. Such things as natural disasters, auto accidents, embezzlements, thefts, eminent domain proceedings to name some. I can represent either the insurance company or the business owner, but not both at the same time.

When an insurance company is involved, they will have an expert representing them. If the business owner wants to be successful, they should also have an expert on their side. Items that are not shown on the financial statements such as favorable leases, intangibles, location, goodwill are important and should be considered. Do not rely on the insurance companies to bring these items to your attention.

With a professional business valuation report, you may be able to obtain a fair settlement without litigation. If litigation is required be prepared to have an valuation expert on your side.