Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
The appraisal of a business entity
The investment value of a business, or its "going-concern" value, reflects the fact that an income generating business with real property assets generally has a value higher than its liquidation value since "going-concerns" are by definition established. The value of a "going-concern" depends not only on its assets, like the underlying real estate and the inventory, but also on the business entity's ability to produce net profits over time. Appraisers of "going-concerns" thus investigate historical profits and losses and attempt to forecast how it will perform in the future.
Appraisers often consider traffic count as part of their analysis their is a correlation between the demand for a retail property and its average daily traffic count. A property that has 30,000 vehicles per day passing it is simply not as sought after as one that has 100,000 vehicles per day. Properties like C-stores know just how important vehicle traffic counts are to their bottom line. In the same way, pedestrian counts are important to Las Vegas Strip properties. The Strip at certain points has literally millions of pedestrians passing over it during a 24-hour period. Even not so popular segments of the Strip can see 6,000 pedestrians an hour. Having or not having a strong pedestrian volume can make the difference in wild success or total and complete failure to a business.
When you think about it appraising a marijuana dispensary is not that much different from appraising a restaurant or a taco stand. You can sell 40 different kinds of weed and paraphernalia but it's all about what you pay for the product, your expenses and what you can sell it for. In other word it's all about net profits. Business appraisers try to establish historical evidence by looking at income and expenses over several years. If you know what to expect over the next several years you know what you can afford to invest as a buyer and get a return on your time and money.
The initial reaction of most appraisers to that comment is to ask “are you buying the real property, the business entity or both?” It’s amazing when at times you discover that a buyer doesn’t even know what he or she is wanting or trying to buy. For appraisers the assignment is dramatically different if it’s just a real property appraisal versus a business appraisal that includes the real property. Most qualified real property appraisers wouldn’t have a problem completing an appraisal of the real property. If the party needs a business-only appraisal most real property appraisers would pass the client along to someone who appraises businesses. An assignment can however swerve quickly if it has to include both the real property and intangible assets like licenses and business income and it’s then described by the client as a “going-concern” appraisal including the real property. That usually means that it’s not just a real property appraisal that’s needed, it’s real property