When Do I Need a Business Valuation: Compliance, Growth, Sale, Or Dispute Resolution

In our experience, the majority of closely-held business owners who have not obtained a business valuation fall into one of two categories.

The first group includes those who have never been approached to sell their business, have never needed to attract outside capital, or have never experienced a business-related conflict (i.e. partner dispute or marital divorce) requiring legal resolution. Accordingly, this group of business owners are largely unaware of the need and utility of a business valuation.

The second group includes business owners who have an acceptable sale price for their business in mind and thusly assume they do not need their business valued. Unfortunately, these owners are often disappointed when trying to broker a sale of their business as their price is potentially unrealistic. In either case, obtaining a professional business valuation helps a business owner determine the true value of their business.

Although there are many triggers for performing a business valuation, some of the more typical ones include:

  • Setting a baseline value from which to determine if your business’ operation and growth strategies are translating into tangible value.
  • Providing you with a starting point from which to negotiate the sale of your business, either for true exit planning or succession planning internally.

  • Determining if an offer to purchase your business is reasonable.

  • Assisting start-ups with attracting outside investors by having an independent, third-party assessment of actual value.

  • Helping owners understand the true value of their business along with what drives that value and protect their business accordingly by purchasing appropriate insurance coverages (i.e. key person risk).

  • Satisfying an accounting, tax or legal requirement.

  • Aiding business owners with dispute resolution and provide support litigation support such as in a divorce, shareholder conflict, or insurance claim.