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Some Business Appraisal Terms
Licensed appraisers are available to estimate the value of a home or business. Business appraisal may be completed for a variety of reasons. A prospective business owner may have a location appraised prior to start up. A current business owner may have a location appraised for insurance or sale purposes. Regardless of the reason behind the appraisal, following are some terms relating to business appraisal.
Asset – Asset refers to any valuable item that an individual or company owns.
Benefit Stream – This is basically the profit generated by a commercial location. When a property is being appraised using an income approach, the cash flow created by the business is factored into the value of the property.
Broker – A broker is someone other than the property’s prospective buyer or seller who negotiates the terms of sale. Brokers typically earn commission based on the sale.
Capital – Capital is a business’s profit that is typically reapplied to the business’s operation.
Depreciation – Depreciation refers to a decrease in value of a property. This can be caused by a variety of factors, including a decrease in resources or uncontrollable market influences.
Equity – Equity is the difference between the amount of money owed on a property and the current market value of the location.
Fair Market Value – This is the amount that, theoretically, would be paid for a property. Fair market value is determined assuming that neither the hypothetical buyer nor seller is particularly motivated by personal or financial reasons and that both parties are reasonably informed about the property.
Valuation – Valuation is a synonym of appraisal. This is the estimated worth of real estate, usually factoring in market value, investment value, and other relevant details. Valuation can only be determined by a licensed and experienced appraiser.
If you're interested in either buying or selling a small business, you should consider hiring a certified business appraiser for all your valuation needs. By receiving an official appraisal from a trained professional, you'll have a better understanding of the net worth of the business, and therefore how valuable it is to not only its industry, but the overall market as well. Another good reason why it's always a good idea to get a professional opinion when buying or selling a company, whether it's a small business, start up company, or franchised retail company, is because certified appraisers have years of experience dealing with commercial valuation, trade, and sale. If you're selling your small business, you should definitely hire a business appraiser or broker so that you don't sell yourself or your company short. Unless you get a professional opinion, you might not know just how valuable your business is to the market. To find an appraisal professional in your area, consider going online and researching the market. Search for such keywords as “business appraisal,” “selling a business,” or “buying a business.” If you're interested in your value, you could also purchase software specifically for this. Overall, what it comes down to is that if you're interested in buying or selling a business, regardless if it's a franchised company, corporation, or simply e-commerce niche online, you should invest in your business' value. Once you find a certified source of business appraisal online, check out their about page on their website, their testimonials, and their success stories. Call them for specific information such as client names, recent activity, and how long they've been in business. By following these tips, you'll learn the true value of your business in the market and know how much money to ask or offer.