Business valuations are frequently provided to assist in establishing an approximate worth of a business. One reason for a valuation is to prepare for an impending sale or disposition of a company. Both the buyer and the seller will want an estimate of the fair market value of a business in order to determine the price at which the business should be sold. Additional reasons for having a business valuation include:
· Estate and inheritance taxes
· Buy/Sell agreements
· Financing and capitalization requirements
· Change in majority or minority ownership
· Need to determine return on investment
· Determination of multiple owners’ values, such as in a Employee Stock Ownership Plan
In conducting a valuation, there are certain considerations that must be kept in mind. Although formulas and guidelines exist for conducting a valuation, they can almost never be rigidly applied. Instead, they must be adapted to individual situations, and judgement, intuition, and experience must temper their applications. In addition, two or more methods may be integrated to arrive at a final valuation.
We can assist in developing a “Fair Market Value” for a business. However, the true value is determined by what a willing buyer and a willing seller will agree upon. As is true in real estate appraisals, business valuations will often fall within a range of high and low values. Whether a business is passing to a closely held family member, or to an external third party, our CPAs and valuators will work with clients to perform a valuation best suited for the intended purpose.