Upon acceptance of the Proposal, RVFF Consulting will also provide a detailed Request-For-Information which will be examined during the engagement, and schedule dates and times for interviews with key personnel regarding the operations of the business.
In addition to the data provided by management, RVFF Consulting will also collect relevant economic, market, industry and regulatory data to be used in the assessment of value.
Pertinent to the analysis, RVFF Consulting will conduct interviews focusing on operational performance / workflow, professional capabilities, professional experience, organizational structure, and strategic goals.
Based on information collected from internal and external sources, RVFF Consulting will identify and consider all key factors affecting value and give weighted attention to various valuation procedures and methods specifically defined through the three (3) Approaches to Value:
- The Income Approach relates the value of the business to its ability to generate a return on investment measured as its economic income. Since the value of a business depends on the future benefits it will generate, then the approach is based on the economic principle of expectation. The investor anticipates economic income to be earned from the business. This expectation of prospective economic income is then converted to a present value, which is an indication of value of the subject. Key in the application is the development of a discount rate that is appropriate for the specific definition of economic income.
- The Cost (Asset-based) Approach determines the replacement and/or reproduction cost in developing another asset with the same or similar utility in the current marketplace. Each account group will be considered and measured on the basis of costs directly associated with niche industry standards as of the Date of Value.
- The Market Approach estimates the value of a business by looking at the pricing of comparable businesses relative to a selection of common variables like economic earnings, cash flows, book value, gross sales, etc. Regardless of the method selected within this approach, finding a business with the exact characteristics as the valuation subject is an impossibility. Rather, the standard sought is one of reasonable and justifiable similarity. Recent court cases mandate that the search for operating similarities that might suggest comparable market attraction, should include: capital structure; management depth; personnel experience and duties; nature of competition; maturity and market share of the business.
The results of the data analysis, examination and measurements of value will be explained within a Detailed or Summary Report as agreed to in the Proposal.