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How much is my business worth?

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By Russ Phillips Jr., CPA, CVA

“the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, neither under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts”
(National Association of Certified Valuation Analysts, NACVA)

 

The valuations of closely held businesses became a formal process during the 1920’s when the alcoholic beverage industry was forced to close due to the Eighteenth Amendment instituting prohibition. This action created the need to value these closely held businesses to determine the extent of their losses. Since the 1920’s businesses have been valued for a variety of reasons, resulting in the creation of a major consulting service in which accredited business valuation experts play a critical role.
Below are fifteen common reasons for business valuations:

  1. Mergers and acquisitions
  2. Litigation and ownership disputes
  3. Estate, gift and income tax
  4. Marital dissolutions
  5. Dissenter’s right cases
  6. Employee Stock Ownership Plans (ESOPs)
  7. Financial Reporting
  8. Allocation of purchase price
  9. Goodwill impairment
  10. Buy/sell agreements
  11. Family limited partnerships
  12. Reorganizations and bankruptcies
  13. Business planning
  14. Stock option plans
  15. Compensation

For questions regarding business valuations – please contact Russ Phillips Jr., CPA, CVA

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