What does Business Enterprise Value (BEV) Mean?
Business Enterprise Value, also known as BEV, refers to the value of a business.
“A term applied to the concept of the value contribution of the total intangible assets of a continuing business enterprise such as marketing and management skill, an assembled work force, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements.”
Source: Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010).
What it Means
In situations where the real estate and business operations are linked, such as a restaurant, lenders will often ask for a total “Going Concern Value“, which would include the Market Value of the real estate plus the Business Enterprise Value. While the value of the real estate includes the value of the building (improvements) and the land, the Business Enterprise Value accounts for the value of the business operations itself, something the real estate value will not take into account. Even in a commercial or investment situation where the property is leased and paying rent, the Income Approach will not reflect income from the actual business, rather, only income received for renting the real estate.
Depending on the property and business, the BEV may be a large component of the total “Going Concern Value”, or simply irrelevant. Branding, skill, management, patents and trademarks can greatly affect Business Enterprise Value and must be considered with care.
Refer to our Value Vault resource section for additional appraisal definitions and appraisal related topics.