Business Valuation Uses and Costs
Recent articles in Inc. and Entrepreneur magazine conclude that business valuations are critical for businesses of any size--and not just when a business is being bought or sold. Inc. magazine recently stated:
"A business's success is ultimately measured by a business's value. . .Knowing your net worth as a private business owner provides a useful snapshot of where your company stands, what options it has, and how it can improve in the long term."
Some common uses of valuations include:
- Determining the price to buy, sell or merge a business. Determining value of spin-offs.
- An annual reality check of your business performance.
- A tool for aligning employee goals and business improvement.
- Adding new shareholders, setting prices for new stock purchases or buying back shares from existing shareholders.
- Business owner personal net worth calculation for estate tax liability and planning, insurance, financial planning.
- Obtaining and maintaining financing.
- Employee stock ownership plans.
- Stock option and other incentive plans.
- IPO Research.
- Research into feasibility of management or other leveraged buyouts.
- Divorce proceedings of shareholders.
- Litigation support.
- Mediation and arbitration of disputes (e.g. between shareholders/business partners).
- Valuation of business spin-offs.
- Bankruptcy, liquidation or reorganizations.
- Exit Strategy.
- Conducting due diligence.
CPAs and other valuation specialists typically charge from $3,000 to $10,000 to value smaller businesses and up to $15,000 to $25,000 or more for mid-size or larger businesses. Our valuation software is widely used and trusted for these types of engagements and costs from $495 to $970 (with comparable private company sales statistics available for $345).
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