A Proven Financial Tool
An independent, professional business valuation is a proven financial planning tool for businesses that range in size from small start ups to large and well established corporations. Simply stated, a Business Valuation is “the act or process of determining the value of a business enterprise and the ownership interest therein”. The simplicity of a business valuation ends with the definition.
The needs that drive business valuations vary, and are significantly different for the small business and the large public company. However, the reasons for commissioning a professional business valuation spans the life cycle of all businesses. As a business starts out and grows, business valuations typically support:
‣ Estate Planning
‣ Key Person Insurance
‣ Succession Planning
‣ Buy/Sell Agreements
‣ Shareholder Agreements
‣ Estate and Gift Taxes
‣ SBA/Bank Financing
‣ Sale of Business
A mature business or public company will have a very different set of drivers to prompt the need for a business valuation:
‣ Corporate Planning
‣ ASC 350 Goodwill Impairment Testing (Step 1)
‣ Mergers & Acquisitions
‣ Privatization/Recapitalization of Company
‣ Public Offering
All of the above needs for a business valuation are event driven. However, the wise business owner or financial executive anticipates the need. For instance, advisors often recommend that a small business owner contemplating either selling or transferring ownership of a business to begin the planning five years in advance. A business valuation, coupled with the advice of a professional team, including accountants, attorneys, financial planners and investment banker, will allow the owner to make the adjustments in the business operations to maximize the selling price at the right time.
Understanding Specific Company Characteristics
Larger companies often present a more complex set of circumstances to be addressed, and the planning process will require more time. A business valuation may need to be performed for the initial planning of the transaction, and subsequently updated at the transaction date. Involving an appraiser early in the process will allow for these possibilities to be discussed ensuring the expected outcome of the planned transaction.
EAC Valuations LLC has provided business valuations to a wide array of clients to meet their individual valuation needs. Our business valuation experts have the professional designations and the experience to provide an independent, professional business valuation with credible results.