Business Valuation Consultants, LLC

Thirteen reasons to have your business valued:
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There are many reasons why business owners should obtain a current valuation for their business valued.

Selling or buying a business
“Buying out” or “bringing in” a business partner
Conducting due diligence
Retirement or financial planning
Planning your exit strategy
Settling the estate of a business owner
Estate or gift tax planning
Divorce negotiations
Buy-sell agreements between co-owners
Strategic Planning - evaluating the performance of your business
Obtaining financing
Settling shareholder or partner disputes
Evaluating goodwill impairment

What can I do to increase the value of my business?

Set out on path to increase value:

Focus on increasing cash flow – Cash truly is king. Your business will be worth more if it is consistently producing good cash flow
Build a solid management team, and groom a successor – Your business is worth more if you don’t have to be there 24 hours a day 7 days a week.
Systems development - Develop operating systems that improve sustainability of cash flows
Modernize and improve facilities appearance – A clean, modern facility increases the value of your business.
Diversify customer base – Developing a broad customer base mitigates the risk of losing a customer which would negatively impact your business.
Pay down debt – It is important to maintain a good balance of debt in relationship to paid-in capital.
Implement a strategy to grow the company – Plan the work and work the plan.
Create an exit plan and make business decisions in light of the plan – As Stephen Covey says, “Begin with the end in mind”.

Business Valuation Consultants, LLC
220 Stoneridge Drive, Suite 402
Columbia, South Carolina 29210
Fax 803.771.0770

Frank D. Thomas, CPA, CVA
Direct Dial 803.665.2256

Jamin D. McCallum, CPA, CVA

How much is a business worth?
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On the surface, this appears to be a simple question. However, there is no simple answer. Business valuation is a process, which depends on a number of factors:

What is the reason for the valuation?
What is the correct standard of value?
What methods will be used to value the business?
Is the financial information being used reliable?
Are normalization adjustments necessary?
What capitalization or discount rate should be used?
Is a marketability or minority interest discount appropriate?
What about a control premium?

These are just a few examples of the types of questions and issues that must be addressed when valuing a business. You must also remember that beauty is in the eye of the beholder. If you are purchasing or selling a business, the perceived value depends on whether you are the buyer or seller. The buyer naturally wants to pay a lower price while the seller may think their business is worth two or three times the amount of a fair price.

What is the reason for the valuation?
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Many situations may warrant a business valuation engagement. There are tax and non-tax motivations for valuing a business. Some of which are:

Purchase or sale of all or part of a business
Income tax and estate tax planning
Purchase price allocation of value among assets
Employee stock ownership plans (ESOP’s)
Mergers
Dissenting stockholder suits
Buy-sell agreements between owners
Loss of business
Charitable contributions
Divorce
Obtaining financing
Personal financial statements
Determining damages

GAAP basis financial statements versus Fair Market Value

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An important difference to note is that GAAP basis financial statements generally reflect the historical cost of the assets owned by a business. Business valuations adjust the historical cost amounts to fair market value. For this reason, you cannot compare a business valuation report with a GAAP basis financial statement.

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Exit Strategies for business owners

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What is an exit strategy? Simply put, it is a long-term strategy for how you will leave your business. Every business owner leaves their business at some point, some are fortunate enough to be able to do it on their own terms. For this to happen, you must have a plan. Many people envision what they will be doing during retirement, but they seldom think about what will happen to their business when they are no longer involved on a daily basis.

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If you are the typical business owner, your business is your life. You need to plan for your business to continue when you are no longer involved on a daily basis. The typical small business owner wears many hats and stays busy attending to the day-to-day requirements for operating his business. As Stephen Covey puts it, “Begin with the end in mind.” Once you have an exit plan, you can manage your business toward your long-term goals. A business valuation can be an important part of that plan.



	Thirteen reasons to have your business valued: There are many reasons why business owners should obtain a current valuation for their business valued. Selling or buying a business “Buying out” or “bringing in” a business partner Conducting due diligence Retirement or financial planning Planning your exit strategy Settling the estate of a business owner Estate or gift tax planning Divorce negotiations Buy-sell agreements between co-owners Strategic Planning - evaluating the performance of your business Obtaining financing Settling shareholder or partner disputes Evaluating goodwill impairment	What can I do to increase the value of my business? Set out on path to increase value: Focus on increasing cash flow – Cash truly is king. Your business will be worth more if it is consistently producing good cash flow Build a solid management team, and groom a successor – Your business is worth more if you don’t have to be there 24 hours a day 7 days a week. Systems development - Develop operating systems that improve sustainability of cash flows Modernize and improve facilities appearance – A clean, modern facility increases the value of your business. Diversify customer base – Developing a broad customer base mitigates the risk of losing a customer which would negatively impact your business. Pay down debt – It is important to maintain a good balance of debt in relationship to paid-in capital. Implement a strategy to grow the company – Plan the work and work the plan. Create an exit plan and make business decisions in light of the plan – As Stephen Covey says, “Begin with the end in mind”.
	Business Valuation Consultants, LLC 220 Stoneridge Drive, Suite 402 Columbia, South Carolina 29210 Fax 803.771.0770 Frank D. Thomas, CPA, CVA Direct Dial 803.665.2256 Jamin D. McCallum, CPA, CVA How much is a business worth? On the surface, this appears to be a simple question. However, there is no simple answer. Business valuation is a process, which depends on a number of factors: What is the reason for the valuation? What is the correct standard of value? What methods will be used to value the business? Is the financial information being used reliable? Are normalization adjustments necessary? What capitalization or discount rate should be used? Is a marketability or minority interest discount appropriate? What about a control premium? These are just a few examples of the types of questions and issues that must be addressed when valuing a business. You must also remember that beauty is in the eye of the beholder. If you are purchasing or selling a business, the perceived value depends on whether you are the buyer or seller. The buyer naturally wants to pay a lower price while the seller may think their business is worth two or three times the amount of a fair price.
		What is the reason for the valuation? Many situations may warrant a business valuation engagement. There are tax and non-tax motivations for valuing a business. Some of which are: Purchase or sale of all or part of a business Income tax and estate tax planning Purchase price allocation of value among assets Employee stock ownership plans (ESOP’s) Mergers Dissenting stockholder suits Buy-sell agreements between owners Loss of business Charitable contributions Divorce Obtaining financing Personal financial statements Determining damages	GAAP basis financial statements versus Fair Market Value An important difference to note is that GAAP basis financial statements generally reflect the historical cost of the assets owned by a business. Business valuations adjust the historical cost amounts to fair market value. For this reason, you cannot compare a business valuation report with a GAAP basis financial statement. Exit Strategies for business owners What is an exit strategy? Simply put, it is a long-term strategy for how you will leave your business. Every business owner leaves their business at some point, some are fortunate enough to be able to do it on their own terms. For this to happen, you must have a plan. Many people envision what they will be doing during retirement, but they seldom think about what will happen to their business when they are no longer involved on a daily basis. If you are the typical business owner, your business is your life. You need to plan for your business to continue when you are no longer involved on a daily basis. The typical small business owner wears many hats and stays busy attending to the day-to-day requirements for operating his business. As Stephen Covey puts it, “Begin with the end in mind.” Once you have an exit plan, you can manage your business toward your long-term goals. A business valuation can be an important part of that plan.


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