By David J. Nissen, CPA/ABV, CVA, Managing Director
Business value cannot be determined – unless it is measured. Savvy executives who leverage credible valuations are positioned for success. Why? Because they are armed with transparent, substantiated knowledge about the value of their assets, and they leverage this knowledge to inform strategic decision-making.
Are you leveraging business valuations to gain an advantage? As important, is your business valuation serving your strategic business needs while also meeting certain substantiation, regulatory and financing standards?
The Art of Business Valuations
Business valuations are a critical, strategic tool – whether you are keeping your business or selling it. Why? Because knowing a business’ value can position owners to leverage valuations for financing purposes or to support value for buyers or sellers in a sale, merger or acquisition transaction.
Unfortunately, not all valuations are of equal benefit ‒ errors in business valuation calculations and mistakes in judgment can result in lost deals, lost opportunities for gain and hundreds of thousands ‒ if not millions ‒ of lost dollars. However, when performed with precision, they help businesses understand the impact of certain transactions on their business. Strong business valuations bring transparency ‒ they identify the benefits, ambiguities, risks and value of certain assets and liabilities.
In short, business valuations are an art ‒ a dance of expertise, judgment and experience. They are complicated, highly specialized calculations representing critical points in time that can make or break a business. For business valuations to bring significant value and inform impactful decision-making, they must have key characteristics. They must be backed by substantiated, supportable data and analysis. The judgment applied to valuations must be supported by an integrated team of specialists with extensive experience, expertise and innovative practices. Precision-like skill and innovation are required to arrive at a value calculation at the sweet spot of intent.
Reasons to leverage business valuations include:
- Supporting financing needs
- Planning for retirement
- Developing a succession plan
- Arranging buy-sell agreements with partners
- Preparing for a sale, merger or acquisition
- Planning for tax and estate strategies such as purchase price allocations
- Substantiating value in financial forensics cases or defending against litigation
Choose Your Business Valuation Team Wisely
To increase the likelihood of accessing the greatest value from a business valuation, look for advisors with valuation certifications and specific training. Strong valuation experts have litigation, tax, M&A, and forensic investigative experience. They possess deep expertise, supportable judgment, and experience with accepted business valuation methodologies. Please connect with us to learn more.