AFA Valuations make Projections Real
The value of third party attestation cannot be underestimated. Having a valuation legitimizes your projections turns concepts into value.
What is your company worth? How do you find support for research numbers? Can your numbers stand up to scrutiny? Often we focus on developing concept to create support for natural bias. Bias by definition means judgement that lacks independence.
Anytime a business owner justifies their project, the justification is bias. Regardless of right or wrong the opinion is influenced by the outcome. All project principals want their projects to succeed. The definition of a good leader (to many) is belief of success.
It is rare to find a situation where a person can entertain the opposite. This truth especially is evident when bills are dependent on success or failure of a project.
VALUATION EXPERTS
A valuation expert is a Chartered Financial Analyst (CFA) or an Accredited Financial Analyst (AFA). Each person fulfills the same function with the exception of AFA having a global distinction recognized in countries outside the United States.
Eligible candidates must successfully complete at least one of the following to receive an AFA distinction:
1. GAFM-approved degree (graduate or undergraduate) in finance, tax, accounting, financial services, law or a CPA, MBA, MS, PhD, or JD from an accredited school or organization.
2. Five or more approved and related courses from an AACSB or ACBSP accredited business school or GAFM sanctioned program
3. GAFM Executive Certification training course
In addition AFA designation personnel are required to conduct 15 hours of continuing education.
CFA, which stands for Chartered Financial Analyst, is a credential granted by the CFA Institute. In addition to having a bachelor's degree and four years of professional experience in a full-time job that involves making decisions about investments, one must pass a series of three exams.
When enrolling in the CFA Program, you will have to complete a Professional Conduct Statement form on which you affirm you are in compliance with the CFA’s Code of Ethics and Standards of Professional Conduct. It includes disclosing any investigations, litigation, complaints, or disciplinary proceedings related to professional conduct.
APPRAISALS FOR BUSINESSES
The best reason for contracting an AFA or CFA personnel to evaluate your business / business plan is it is an "Appraisal" for business
Think of trying to sell a house without knowing the value. How would a realtor list the prices of houses if no one knew what the price was? More importantly how would you justify buying a house if the only one who told what it was worth was the person who built it?
Time is valued differently by different people.
Sometimes time is overvalued by people. The same applies to people and their dreams. You may believe you have a million dollar business plan but the truth is it might be worth ten thousand dollars.
SHOWING REAL VALUE
Justifying value for businesses comes in three (3) areas. These areas are 1) Market 2) Income and 3) Assets.
Market is the area where your projections come from. This is research and development. It also values how much market you currently have in control. Controlling your backyard is worth something albeit not that much.
Income is based on income multiples. Different multipliers apply to different segments of income: 1) Gross Revenue, 2) Gross Profit, 3) Net Profit, 4) Earnings Before Income Taxes Depreciation & Amortization, 5) Net Operating Income. Each one gets a different multiplier and is weighted. Some industries focus on Gross Revenue where others focus on Net Operating Income. Each one is different.
Assets are just that. Asset based values are driven off what a business owns. This is just like real estate. A real estate holding company can be rental driven or land based. Companies who own vacant land are still worth something. These types of companies might benefit from just asset focus. Leaving out income and market could be wise.
IN CLOSING
All projects and businesses should have valuations. The most important factor of your project is telling someone what it is worth. Don't overlook the most important part of a business. Raising money requires someone know what the value is of what you are selling. If you are selling a stock you need an appraisal. Don't go unprepared to a negotiation. Contact us today to discover how Knight Advisory & Planning (KAP) can assist your offering with an AFA certified valuation.
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Knight Advisory & Planning (KAP) is the only company to primarily focus on Public Private Partnerships (P3) since 2006. KAP operations are spread across countries of the world to serve this need. KAP Network consists of core partners surrounded by interlocking networks of consultants and affiliates in key trading countries and disciplines. We maintain Master Project Manager (MPM) who are American Academy of Project Management (AAPM) certified and are experienced in the following industries: construction, development, finance, technology, FinTech, biotechnology, production, R&D, and manufacturing. With over twenty (20) years of experience let us guide you through the P3 process.