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Methodology for determining the value of family businesses in the succession process
Režňáková, Mária ; Karas,Michal ; Srbová, Pavla ; Pěta, Jan ; Brychta, Karel
The methodology is based on valuation methods commonly used for valuation of companies. This methodology offers a refinement and modification of the application of standard valuation methods based on the knowledge obtained from the analysis of data of Czech enterprises and affects the specifics of small and medium-sized family businesses in the Czech Republic. From this perspective, it is an original approach, which was developed by the project researchers, justified by appropriate methods of statistical data processing and continuously submitted for review in presentations at scientific conferences and in professional articles. In the framework of the project, a family-friendliness factor has been developed, which allows the specificity of family businesses to be incorporated into the valuation model. In addition, a cost of equity model for small and medium-sized enterprises was derived, which is a modification of the CAPM and is based on data from Czech SMEs. It takes into account both the industry specifics of Czech enterprises and the rate of return achieved in the Czech Republic. Users have at their disposal total beta coefficients (beta total) for individual NACE industries (in many cases even sub-industries), which have not yet been quantified for the Czech Republic and their use is wider than just within the framework of this methodology. The methodology provides both recommendations for specifying input parameters in determining the value of a company according to the purpose of the valuation and the expected development of the company, as well as information on the industry values of the parameters used in the valuation. Users who are not professionally involved in this issue have the possibility to use the software developed, which allows to determine the value of a family business in a simplified way. The simplification lies in the fact that it is not possible to take into account all the specifics of each entity that may be valued, but also in the fact that the input parameters are generally set on the basis of past developments. At the same time, the user has the possibility to adjust these parameters according to the knowledge of the situation of the enterprise to be valued. The methodology is also an original approach from an international point of view: the authors are not aware of any other published methodology that measures the specificity of family businesses and at the same time demonstrates their influence on the performance of family businesses, and incorporates the family factor into the process of determining the value of a family business. This methodology is certified by the Czech Society for Quality (certificate number M063/M/2022 dated 29.11.2022)
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