financial planning

Business Valuations

What is your business worth?

Few things are more important to business owners than the value of their business. The valuation you get for your business can make or break a proposition. We can provide in-depth analysis to help you identify and analyze the factors that drive the value of your company. Whether you plan to sell your business, retire, or determine a value for your estate, these services will let you know where you are so you can know where you need to go.

The prospective sale of a company might seem to be the obvious reason for getting a business valuation, but there are many other reasons as well. They include:

Estate, gift and trust planning - A value must be placed on all assets, which includes the business, for estate taxes and annual gifting.
Buy/sell agreements - A buy/sell agreement is an understanding between shareholders of a closely held business that specifies the terms and prices of a buyout when one or more shareholders want to sell.
Mergers or acquisitions - If the merger is through the exchange of stock, both companies must be valued to establish a fair exchange.
Divorce settlements - Typically, a business must be valued during divorce proceedings. The business is usually given to one spouse while the other receives assets of equal value.
Litigation - In addition to divorce, there are other types of litigation that require a business valuation, such as eminent domain proceedings and insurance claims for lost business.
Employee stock ownership plans (ESOPs) - An ESOP is a retirement plan in which company stock is donated instead of cash. The value of the stock must be determined annually to establish the employer's deduction for the contribution.
Company report card - A business valuation is an excellent starting point for developing a strategic plan for your company's future. A valuation will point out areas of weakness and strength, as well as possible opportunities for future growth. Many businesses use valuations on a regular basis to objectively measure their company's performance.

Factors that can make or break the value of your company

There are some key ways to increase your business value or to limit your business value.

Top 10 Value Enhancers

Trained, stable work force
Established, creative management team
Product/service with a clear competitive advantage
Stable revenues and profits
Clearly defined goals - corporate focus
Expanding markets
Opportunity for significant productivity increases
Well-maintained plant and equipment
Effective management information systems
Barriers to market entry

Top 10 Value Detractors

Low morale and high employee turnover
Dominant, autocratic leadership
Highly competitive product/service lacking differentiation
Volatile revenues and profits
Lack of cohesive business strategy
Stagnant or declining markets
Limited productivity enhancement potential
Poorly maintained physical plant
Lack of management information
Ease of market entry

Value Enhancement Advice
Because of our experience with business valuations, we know what elements of a business will add or detract from the value. We can work with you to structure your business to make it more attractive to prospective buyers and enhance its value.

All Business Aspects
A business valuation takes into account all aspects of a business. You may believe the value of your business is net profit or gross sales, multiplied by some industry rule of thumb. It's not. In fact, using an industry rule of thumb formula often results in a value determination that differs greatly from the actual value that could be determined by a qualified business valuation professional.

Placing a monetary value on a company or business involves much more than simply determining what a potential buyer might pay for it. There are many factors that need to be taken into account - such as the type of company, market value, investment value, growth potential, tax laws and, of course, the individual circumstances of each business owner.

Accurate Value Determination
An inaccurate value determination, regardless of whether it is high or low, generally leads to undesirable consequences. If it's too high, your estate taxes will be excessive and savvy investors or prospective buyers will usually disregard the value. If it's too low, you can be sure savvy investors or prospective buyers will recognize it and take advantage.

Management Tool
But, one of the best reasons for obtaining a business valuation is to use it as a management tool for your business. A prime objective for all business enterprises is to improve and maximize its value to the owners. A properly prepared business valuation provides you with insightful information that helps identify your company strengths and weaknesses that affect value, allowing you to more effectively focus your energies in places that really count.

Our professionals have experience in a wide range of business valuation issues and will get to know your business. This will enable us to provide a well-reasoned, fully documented and defensible value opinion for your company.