Southern Nevada’s First and Only
Valuation Consulting Firm
based in Las Vegas and
providing Local Expertise!

"Whoever said you have to be from out of town
to be an expert, was probably from somewhere else.”

The Gryphon Value-added Proposition

• Defining Value
• Breaking down the Value
• Discovering Value
• Taxes vs. Profitability
• Defending Value

“Our mission is one of defining, discovering and defending value for the needs, goals and objectives of our clients—in an atmosphere where confidentiality is paramount.”
-Donald R. Parker, CFA, AVA
Founder

Defining Value .......... top
A primary objective of business owners is to maximize the value of their interests. In that endeavor, it is of primary importance to identify those aspects of the business that define value. A properly prepared business valuation can provide insightful information that can define the strengths and weaknesses (we prefer to call them opportunities) of the business enterprise.

Many business owners believe that the value of their business is based on some rule of thumb (multiple of earnings, revenues, etc.). Unfortunately, rule of thumb formulas often (if not always) result in valuations that lead to undesirable consequences— miscalculated estate tax estimations, lack of optimal succession/exit strategies, less than favorable litigation outcome, etc.

Breaking down the Value .......... top
There are two primary components of any business enterprise that make up value: tangibles and intangibles. Tangible assets are those things that you can touch, taste and feel. These are the “hard assets” of the business and are usually easily identified. The determination of their value is relatively straightforward. Intangible assets are more difficult to value and in most cases, represent more value to the business than the tangible assets. Intangible assets can include customer lists, patents, trademarks and copyrights, strength of management, non-compete covenants, special processes, physical location, brand recognition, and other aspects of the business material to producing revenue. The valuation of intangible assets is more art than a science. The valuation analyst must understand the business’s strengths and areas of vulnerability, the competitive landscape, marketplace expectations, and industry and economic prospects along with other factors having a material impact on future earnings potential. All of these elements affect the risk of ownership interest, which in turn affects value.

Discovering Value .......... top
The true value of a business is usually not found in the raw numbers. It is incumbent upon the analyst to “dig” below and beyond the surface of the financial statements. Often times, value discovery is very much like digging for lost treasure. Adjustments must be made to the financials to account for items that detract from value such as: excess compensation, aggressive depreciation schedules, non-recurring charges, amortized
goodwill (which is no longer allowed), just to name a few.

Taxes vs. Profitability .......... top
Unfortunately, most business owners have let the tax-tail wag the dog. The focus has been on reducing profitability. This might be a good strategy if one never intends to sell. From an exit strategy perspective, though, the focus should be on profitability. And this focus should prevail for not just the year or two before a proposed exit, but for several years leading up to the sale or transition of the business. Profitability sells. And nothing sells more than a historical track record of profitability.

There are several techniques that can be employed to increase profitability. The following represent just a few: increasing dividends (especially in light of the latest tax legislation), adjusting compensation to realistic levels, minimizing inventory levels, establishing alternative methods of compensation (stock incentives, profit sharing, ESOP, etc.), reorganization of management structure, entering into long-term relationships with suppliers and using hedging techniques to control costs over the long-term. A qualified valuation analyst will be able to not only identify value-enhancement strategies, but can advise the business owner on how to implement such strategies.

Defending Value .......... top
Nothing can substantiate the value of an on-going enterprise more that a well prepared, well documented valuation report in narrative format. An effective valuation report should read like a well-produced documentary, leading each reader to the same
conclusion arrived at by the valuation analyst. A valuation report should embody all the financial, economic, and legal aspects material and incidental to the operation of the business.

Each report produced by Gryphon Valuation Consultants necessarily assumes that the conclusion will, sooner or later, be challenged. Therefore, each comprehensive report is intended to be self-supportive on its own merits. However, should any valuation
conclusion need to be supported due to litigation, mediation or other circumstances,
Gryphon stands ready to deploy whatever resources are necessary to support our conclusions and, if necessary, testify to the findings and conclusions within the report.*

A recommended method for substantiating the value of a business and creating a record of value is to have the valuation report updated annually. This allows the business owner to compare year-to-year key ratios of profitability and to gauge where his or her business stands in relation to other business in the same industry. This knowledge can be invaluable in terms of targeting areas ripe for improvement and avoiding potential
problems before they adversely affect value. This type of proactive approach will undoubtedly translate into increased profitability and stronger financials, resulting in greater company value.


*Gryphon Valuation Consultants, Inc. provides litigation support services under a separate engagement from that of the valuation engagement.