INSIGHTS
Business Valuation Basics
by Bethany Andrew, CPA, ABV
The value of business and personal assets is a central component in the execution of business and legal proceedings. With extensive experience in this area, our accredited business valuators are widely sought after for their skilled ability to assist clients with these delicate issues. Understanding the different types of valuations, knowing when to seek professional help, and selecting the most qualified provider are key to making a sound decision.
What Is a Business Valuation?
A business valuation is a process similar to an appraisal of a home, in which a professional financially analyzes your entire business. This process includes several different steps, including a valuation of your business’s assets, among other factors, in effort to determine the monetary value of the business at a certain date.
There are a few different methods for valuating a business, and the method selected typically depends upon the circumstances of the valuation. While all methods are considered during the valuation process, the valuator ultimately selects the method that demonstrates the best representation of value.
When Would You Need a Business Valuation?
Here are some reasons why you might need a business valuation report:
- You’re considering selling all or part of your business
- You need help obtaining financing from a lender
- You’re planning for a merger or acquisition
- You’re thinking about estate, gift or tax planning to protect your wealth
- You’re planning to transition ownership of your business and prepare for retirement
- You need to update or create a buy-sell agreement for your business
- You need to determine the value of assets and liabilities for a divorce settlement
- You need to file an insurance claim
- You need to resolve stockholder disputes
The Importance of a Business Valuation
Having a professional provide an updated and accurate valuation of your business can bring you enormous benefits and opportunities. For example, you may find an opportunity to sell or merge your business or add a new partner to your ownership group. In these cases, a business valuation provides you with the tools to make effective and timely business decisions about purchase or buy-in prices.
Additionally, a business valuation can help you plan for the future. You may be reaching retirement age and need to know the value of your business to begin detailing your exit strategy over several years. A business valuation can be used as one of your most strategic business tools.
Selecting a Service Provider
Business valuation is a complex process requiring broad knowledge of accounting, finance, economics, expert application of recognized valuation methodologies, and diligent adherence to professional standards.
We have four team members who have earned the Accredited in Business Valuation (ABV) credential from the American Institute of Certified Public Accountants, making us the largest accredited team of any other accounting firm in Whatcom and Skagit Counties. The ABV certification ensures our team has the sophisticated understanding of all aspects of business valuation.
Our Business Valuation Team
“Business valuations aren’t always about providing reports that support legal needs. It’s oftentimes much more personal than that. We were helping a client create a financial plan to ensure he and his wife had enough money for retirement. Part of that plan meant selling their business to key employees. We put together a valuation of the business that helped them understand its worth and how that played into checking off their bucket list items in retirement.”
“I always start with asking my client, ‘What do you want to get out of this?’ In the case where I was performing a valuation for my client going through a marriage dissolution, her response was simple: ‘I don’t know how to answer that because I don’t know what I have.’ Providing a valuation for her meant empowering her to be able to ask better questions and make informed decisions about her future.”
“What I love about our approach in performing business valuations is that we go beyond the numbers. What’s really special is the time we take to truly understand our clients. This once led me to lunch with a client, followed by an unplanned two-hour tour of his business and conversation about his family. Not only did I have a great time chatting with him, but it helped me to understand his goals.”
“Watching my clients lose a loved one is always difficult. Seeing them stressed about the logistical tasks they face amidst grieving is even more difficult. Valuing their business for death taxes is one way I can be of assistance. It’s not just making sure their compliance needs are met. It’s bringing them peace of mind and confidence during a time of turmoil, and I’m honored to do that for them.”
“In my expereince, I’ve found that business owners can
sometimes wait too long to begin thinking about retirement
and may have unrealistic expectations of what their
businesses are worth. I have found that guiding my clients
through the valuation process provides us both with a deeper
understanding of the businesses they have built and level
sets expectations and provides confidence for future financial
decision-making.”
“Deciding to sell a business often becomes an emotional
undertaking. Parting with something that has taken years
to build and develop along with all the relationships with
customers and employees can be a difficult task. Advising
clients beyond the feelings and pursuing an understanding of how to put their business in the best position possible is what we’re here for.”
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Bethany Andrew, CPA, ABV
Partner
Bethany joined Larson Gross in 2009. Today, she is a Partner and leads our Business Valuation team. She specializes audit, accounting, and the valuation of closely held business interest for purposes of litigation support (marriage dissolutions and shareholder suits), estate planning and taxation, and financial reporting purposes.