Business Valuation Services – Ultimate uses

Selling or buying a business is only one purpose for a valuation. Others include estate taxes, salary determination, bankruptcy, divorce and an annual valuation for an Employee Stock Ownership Plan and valuing corporate stock options. Increasingly, owners are requesting valuations simply to get an idea of what their business is worth.

The purpose of the valuation will determine the basis from which the valuation is performed.

A bankruptcy usually requires a liquidation approach: what is the company worth after all assets are sold and liabilities paid. This may be straightforward, or it may include valuing intangibles such as copyrights, trademarks and customer lists which potentially have a value from a sale to a third party.

Valuations for use by regulatory agencies including the IRS and the Department of Labor include estate and gift taxes and ESOPs, compensation and stock options. These are prepared based on fair market value. Simply put, fair market value is the company’s worth to a third party whose intent is to run the company primarily the same way the current owners do. The other type of buyer is for investment or strategic value. The assumptions for a strategic buyer and their impact on value vary based on the specific strategic buyer.

In all valuations, it is essential to remember the professional renders an opinion, not a statement of fact. Given the same information, two valuation professionals may at different conclusions, both of which are justified.

Kevin Jennings     Jennings Business Valuation, Inc.    2415 Jerusalem Avenue  North Bellmore, NY 11710         516-794-4264