Valuations – 10 More Reasons to Get One Done

Although the most common reason for an accurate valuation is to prepare for the sale or purchase of a business, the list below details 10 additional scenarios where it may be beneficial to have an accurate Business Valuation.

• To become aware of the factors that account for business worth, so that you can intentionally cultivate company value over time.

• As a management exercise. By viewing your company as a prospective buyer would, you will gain a better picture of its strengths, its weaknesses, and where improvements can be made.

• To determine the buy-out price for a partner’s share.

• For estate planning. Owners can avoid overpaying gift and estate taxes by having a well-documented valuation study.

• For property settlements following a divorce.

• For an ESOP (Employee Stock Ownership Plan). A valuation must be conducted annually to support the employer’s deduction for the ESOP contribution.

• To help obtain a business loan by demonstrating to lenders that the company is worth more than the book value shown on its balance sheet.

• When investors in a private firm want to know how they’re doing. For companies on the public exchange, you can just check the daily stock prices, but investors in a private company must do a valuation to find this out.

• To assess the income potential and risk in a business you’re considering.

• To assess the value of a company’s assets prior to dissolution or reorganization.

[Source: Unlocking the Value of your Business, Author, Tom Horn]