Why You Need a Business Valuation

Divorce

After 25 years of marriage the world’s wealthiest couple, Jeff and MacKenzie Bezos called it quits in 2019. The estimated net worth of the couple at the time was $153.1 billion dollars representing 16% of the shares of Amazon. While it’s unexpected that many of us would ever need to determine how to divide this vast of a fortune, the truth remains for some that divorce may be imminent and assets will need to be valued to determine who gets what and how much. If shares in a closelyheld business are owned by one of the spouses, a business valuation will likely be required by the court.

Litigation

Like it or not, lawsuits exist and sometimes we need professionals to assist. When a business has been harmed unfairly or when a minority shareholder has potentially been stepped on by a majority shareholder, a lawsuit often arises. Business valuations are often called for to determine damages or buy-out prices.

Loans

Ever heard of a debt covenant? It’s a fancy term used in the banking industry that basically allows a bank to lend to a business if some sort of ratio(s) is(are) maintained while the debt remains outstanding. While some covenant requirements are straight forward, others may be more complex. Some lenders, especially if the Small Business Administration (SBA) is involved, may require a business valuation. Critical financing for future growth may be obtained with a proper business valuation.

Determining Strengths and Weaknesses

Many assume a business valuation is nothing more than a calculation that spits out a number (hopefully a really big one!). However, the valuation process is an extremely in-depth ordeal that examines a company’s, strengths, weaknesses, comparisons to industry peers, evaluation of management bench strength, workforce evaluation, leverage, excess owner compensation and non-operating assets or liabilities that are inside the business entity. A proper business valuation, while delivering a value, can also be used to learn other traits about the business and provide insight for ownership and management regarding matters such as these.

If you’re in any of the situations above or think a business valuation may be something you could benefit from, it may be time to reach out to the professionals at Maner Costerisan. Call or email us, maner@manercpa.com, for a complimentary consultation.

Jeffrey P. Allen, CPA, is a principal at Maner Costerisan Certified Public Accountants who specializes in providing outsourced chief financial officer and controller services to business, not-for-profits and government entities. He also provides business valuation expertise and abilities to closely held businesses looking to buy, sell or gift ownership.

Jessica Fleet, CPA

(517) 886-9549 jfleet@maner cpa.com manercpa.com

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