While there are several ways to value businesses in different sectors (earnings based, dividend based, asset based), the correct method is likely to depend on the size of the shareholding or business interest.

Whatever the approach and the reason for the valuation, we know the process can be a sensitive issue, which is why we bring a commercial, but personal and cost-effective, approach to these assignments. We consider your key issues, and the most appropriate method of valuation, so you get an independent valuation you know you can trust.

Reasons for a business valuation  

1. Succession Planning. If you’re planning to sell your business, it is a great idea to set a baseline value for the business and develop a strategy to improve the profitability and increase the value as an exit strategy.

2. Buy/Sell Agreements. A buy/sell agreement between principals can help to avoid future disputes. A mutually agreed upon value is the starting point for an agreement that is acceptable to all parties.

3. Shareholder and Partnership Buyouts/Disputes. Then again, things don’t always work out. If an owner decides they want out, an independent business valuation is necessary to arrive at a fair settlement of ownership interest.

4. Sales, Mergers and Acquisitions. If your growth strategy includes buying or merging with another company, a business valuation will help you determine if the price you are being asked to pay is a fair one.

5. Employee Stock Ownership Plan (ESOP). To determine the annual per share value of the shares, Employee Stock Ownership Plans must be valued annually by an independent valuation expert, to establish a fair stock price.

6. Funding. When negotiating with banks, venture capitalists or other prospective investors, an objective valuation will help in raising capital.

7. Insurance Purposes. Closely-held business owners will sometimes pursue a valuation to determine a value necessary to cover their business interest value if something were to happen to them. This value is then purchased as “key person insurance”.

8. Estate and Gift Tax Planning. Nobody wants to leave their heirs with the burden of paying heavy taxes on a business that was undervalued. Knowing the value of your business is necessary in order to adequately fund a future estate tax liability.

9. Marital Dissolution. A fair market value of the business interests must be established for an equitable division of assets.

10. Allocation of Purchase Price (for tax and financial reporting). In the event
of a business transaction (e.g. merger, acquisition, sale, etc), the purchaser
and the seller both need to record the sale correctly. Inconsistent and
inappropriate allocation of the purchase price may increase tax liability
and even result in penalties.

Every business owner should know what their business is worth. As a planning
tool it can provide valuable insights to assist with informed decisions about the
business’s future whether you are considering a sale, acquisition, securing
finance, planning your estate, resolving partnership matters or dealing with
taxes.