Core Values
21Feb 2017

Core Business Value Tools

Core Business Value Tools – When a Business Valuation is needed

Want to learn how to increase value in your company? It is important that you know when a business valuation is needed? Look at the following:

·      Merger/Acquisition

·      Financing Sale/Investment

·      Estate & Gift Taxes

·      Purchase allocation/Fairness Opinion

·      Employee Stock Option plans

·      Life Insurance/ Shareholder Agreements

·      Tax vs. Value Considerations

All reasons you need to have a Business Valuation.

Let’s look at some examples: when a certified valuation is needed

1.   Merger or Acquisition: For a merger or acquisition transaction, it is critical that multiple method valuations be completed. KNOWLEDGE IS POWER. If just an Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), the multiplier is used, what data do you have to increase your knowledge or negotiation power? None.

2.   Financing or Investment: If you are seeking funds or investment partners, a certified valuation is essential to provide the insights these partners would need. Multiple business value calculations will be useful for the transaction.

3.   Estate Taxes or Gift Values: The Internal Revenue Service (IRS) requires a value for any stock that is gifted to heirs. A valuation is also needed for assets and business value for estate taxes. A high-quality valuation firm can provide a comprehensive valuation and report that the IRS can easily follow. Excel Management’s team has provided IRS quality reports for 15+ years that have never been challenged by the IRS. They have accepted the findings because they are clearly explained. – Press “Valuation” Tab

4.   Purchase Allocation or Fairness Opinion: If you have a transaction or acquisition a Board of Directors or the firms’ partners will often require a transaction fairness opinion. It is important that the two companies are valued on the same comprehensive basis and methods to give an “apples-to-apples” comparison. This will provide the decision makers with the proper documentation to make a fair opinion.

5.   Stock Option Plans: Years ago the IRS would allow stock option value discounts for employees. This is no longer allowed. Stock options granted must have a current market value associated with the “option strike price” to meet IRS guidelines.

6.   Life Insurance: Small businesses should have key person life insurance to reduce loss risk associated with key employees. A certified valuation is the best option to determine the life insurance and protection needs.

7.   Buy/Sell Agreements: Partnerships or joint ownership arrangements usually do not last forever. It is important, up front, to establish a succession plan with specific certified valuation methods and plans to assess the company value when a partner change is needed.

8.   Tax vs. Value Tool Box: In privately held companies there may be various expenses that provide a tax advantage but should be tracked and added back into the net cash flow for the valuation Income Method. If a transaction is considered, it makes the due diligence process go smoother if the toolbox items are tracked in the profit and loss statement or a spreadsheet.


Business Value Tools – How to Increase Value, Ft. Lauderdale, Dale Richards

Business Value Tools – How to Increase Value, Ankit Jan, Ft. Lauderdale, will use Dale Richards’ valuation concepts and core business tools and levers to raise the value of his business.


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