We help clients assess fair market values to assist with distribution, planning and benchmarking. Individuals can often under or over-value assets due to old information or other assumptions. Typical reasons why a valuation should be considered include:
- Insurance. In partnerships, life insurance is often purchased to fund the buyout of each partner in the event of a disaster. If the business value has grown the life insurance proceeds may not be adequate to fund the buyout, which can lead to legal issues or put the business in jeopardy.
- Divorce. When this occurs, asset values, including the value of the business, need to be measured.
- Succession Planning. Transferring business to a family member(s) requires planning. The goal is to establish a transfer value that can be documented. This allows the family to take steps to minimize tax liability on business gains, while still ensuring the retiring family member has the income he or she needs.
- Exit Strategy Development. In order to maximize the selling price, a valuation can help the owner determine what the business is worth today, and learn what steps might be necessary to make the business worth more when the time to sell comes.
- Litigation Support. Documented support when legal situations arise and damage claims are being disputed.
Examples of when a valuation is needed are:
- Owners planning to retire in 5 years or less or over 50 with children in the business
- Businesses with multiple owners
- Businesses with owners of varying ages
- Businesses that need to validate their life insurance protection
- Businesses that have radically grown or shrunk since their last valuation
- Owners evaluating purchase offers or seeking to buy a business
- Partnerships that may be parting ways
Why Donovan CPAs and Advisors? We have a Certified Valuation Analyst (CVA) on staff. It is strongly suggested that most businesses have an initial valuation done and then updated every three years. There are different levels of valuation services available. For merely informational purposes you can conduct an executive overview valuation that will give you an estimated range of the value. For litigation and planning needs most owners need a more detailed analysis that will generate a document that can be used to support the values reported.
Download our Valuation Questionnaire here.