Partnership or Shareholder Agreements - Agreements between partners or shareholders, often a buy-sell agreement can determine how a business is sold, and when it can be sold. Appraisals are often  performed when a shareholder,  is buying into a business or professional practice or when members of a closely held business want to sell out and move on.

Lost Profits or Economic Damages - Unfortunately natural disasters do occur.  Fire, floods, hurricanes, earthquakes, and tornadoes have destroyed businesses for countless number of years.  It is also not uncommon for business to have theft, embezzlement, conversion of funds, skimming, and commingling of funds to happen.  When any of these do occur, than a business appraisal is needed in order to determine the loss if any an the amount to be attributed from the loss.

Other Reasons - There are many other reasons for a business appraisal. Some of these include: Allocation of Purchase Price when buying or selling a business, Liquidation or Reorganization of a Business, Conversion of a "C" corporation to an "S" or Sub-Chapter S corporation, Financing, Ad Valorem Taxes, Incentive Stock Options, Initial Public Offerings, Insurance Claims, Charitable Contributions, Eminent Domain Actions, etc.

The asset approach uses appraisal methods that consist of a review of the individual assets of the company. The most commonly used asset approach method is called the adjusted book value method. In this method, assets and liabilities are adjusted to the standard of value, for example fair market value. The major weakness of this method is that the intangible asset value of a going-concern business is not measurable. Occasionally, an appraiser may use an asset approach method in combination with a hybrid-method, the excess earnings method, used to value the intangible assets of a company. 

The market approach uses businesses in the same or similar industry to develop valuation multiples that can be used to determine a value for the business in question. Several methods may be used—some use information from the sale of private companies, others use the sale of public companies or the price of stock as of the date of valuation for comparable public companies in the same or similar industry.

The income approach consists of two primary methods: the capitalization of cash flow method and the discounted cash flow method. These two methods are mutually exclusive. The basic difference between the two is based on the stability or lack thereof of expected future income.

Some formulas exist to give businesses in a particular industry an easy, quick way to estimate a value. These formulas are generally referred to as rules of thumb. Rules of thumb usually provide a range of values—often a wide range of possible values. They are best used as checks for reasonableness instead of appraisal methods.

Comprehensive Report: This is a formal presentation of the value of the business in a written format. This type of report best explains what was done and how the value was derived. 

Limited "Abbreviated" Report: This type of report does not include much of what is in a comprehensive report. It is appropriate for some occasions when a case is not going to court; for example, to assist with structuring a buy-sell agreement between two partners, a limited "abbreviated" report may be all that is necessary.

"Letter Report" or Calculations:  This type of report is typically a one page letter with supporting calculations.  This type of valuation is often performed to assist an owner develop an "asking" price for the sale of the business or a buyer an "offering" price.

Fairness Opinion: A fairness opinion is issued when a company has received an offer to be acquired by another firm. The opinion does not express a specific value; but rather a range of values, and  whether or not the appraiser feels the offer received is fair for seller.