Business Valuation Articles

What's Your Company Worth?

Valuation Time:

All sorts of events could trigger a need for valuation; check with your accountant or lawyer whenever major changes occur within your business. You may need a valuation if you're-

  • Applying for credit or a loan
  • Seeking outside investors
  • Disputing the conclusions of an IRS audit
  • Conducting a major strategic-planning initiative
  • Planning for an initial public offering of stock
  • Doing estate or gift planning that involves company stock
  • Creating a company stock-option plan or other benefits plan that involves company stock (such plans also require routine subsequent "mini-valuations")
  • Breaking up a partnership
  • Getting a divorce
  • Entering bankruptcy
  • Selling the company or a division
Did you know that . . .

Though most valuations claim to assign a fair-market value, the results can vary widely. Here are some reasons:

  1. For estate- and gift-tax purposes, an ideal valuation is one that's a low as possible, to minimize tax liabilities. Expect the appraiser to look for any documentable factor that might lower your company's value.
  2. For sale purposes, well-prepared sellers equip themselves with a valuation that documents the highest possible value.
  3. For financing purposes, bankers will look for a valuation that focuses on liquidation value rather that a company's prospects as a going concern.
  4. For litigation purposes, valuations are a dog-eat-dog business. Set your valuation goals according to the side of the case you're on, but remember that the best investment you can make is a comprehensive, fully defensible document from the most blue-chip appraiser you can afford.