Business Valuation

Benefit:

  • Establish a clear value for an organization through an objective third party
  • Protect both buyers and sellers of organizations in transition
  • Avoid IRS setting the business value, which could result in additional taxes owed
  • Often needed to meet regulatory requirements
  • Help families set the value of a family-owned business

Who’s most likely to benefit:

Any organization seeking to establish value for (among many possible reasons):

  • Estate, inheritance or gift tax
  • Mergers, acquisitions and spin-offs
  • Cross-purchase and buy-sell agreements
  • Values-based planning
  • Employee stock ownership plans
  • Litigation (such as divorces or domestic disputes)
  • Minority shareholder interests
  • Subchapter S elections
  • Charitable contributions
  • Personal financial statements
  • Issuing stock

Description:

Business valuation is often described as both art and science. It combines both quantitative and qualitative information-gathering and analysis to reach a value for a business entity.

In any valuation, the valuator and client first agree on the scope and parameters of the valuation (for example: limited or full-scope, purpose and date of valuation, data to be supplied, type of reporting, whether the business is valued as an ongoing concern or for liquidation). Then, based on that agreement, the business valuation specialist reviews and analyzes the organization’s financial and operational data, including financial statements, tax returns, accounts receivable/payable, inventory, and budgets or forecasts. A valuation may include not only tangible assets, but intangible ones as well, so other materials such as the organizational chart and board of directors minutes may be part of the analysis.

At AGH, the valuation specialist also gathers data from sources outside the company, including industry trends, geographic or industry economic data, and data on sales of comparable businesses (“market comps”).

Using the data gathered, the business valuation specialist combines it with a number of additional factors (such as goodwill, competition, market share, industry trends and outlook) in a valuation model to reach a conclusion for the organization.

Useful Resources for You

Infographic
business valuation chart and cash picture
Business Transition

Valuing Your Business

Do you know how to calculate its worth?

Business valuations can help determine the fair market value of a business and are essential when contemplating a change in ownership.
Click to view the infographic.

White Paper
pen and calculator picture
Business Transition

Business Value Drivers

What determines a business' worth?

Value drivers for closely held companies either reduce risk or increase growth/return. Learn more about the four critical value drivers that can influence your business' worth.
Click to read the full white paper.