1.5 min read. As a business owner, it’s crucial to understand the valuation process and the terminology used in it. Knowing these terms can help you prepare for a business sale, merger, or acquisition, or when creating a buy-sell agreement or doing estate planning. In this blog post, we’ll cover five essential valuation terms that every business owner should know. 1. Fair market value: This term refers to the price at which a hypothetical willing and able buyer and seller would agree to exchange property in an open and unrestricted market. Fair market value applies not only to physical assets […]
fair market value
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2 min read. When a shareholder buyout or a divorce involving a business owner is on the horizon, establishing the fair market value of the business becomes a vital step. One way to achieve a mutually acceptable valuation is by retaining a joint expert, who can provide an unbiased opinion of the business’s worth. This blog post aims to guide shareholders of private companies and business owners in divorce proceedings through the process of hiring a joint expert for business valuation. 1. Understand the need for a joint expert A joint expert provides an independent and impartial valuation, reducing the […]
1 min read. There are several benefits of getting your business valued in preparation for the sale of the business in two or three years: Planning: Understanding the current value of your business can help you make strategic decisions about how to grow and improve the business to increase its value before sale. Pricing: A professional business valuation can provide a clear understanding of the fair market value of your business, which can help you set a realistic price when you’re ready to sell. Identifying and addressing potential issues: A professional valuation can help identify any potential problems or weaknesses […]
3 min read. Before engaging a valuation firm to carry out a business valuation, there are several important issues a business owner needs to consider to ensure they’ll receive a value opinion that is most relevant and accurate for their case. 1. Determine the purpose of your business valuation. This is important as it dictates which of several different “standards of value” are appropriate. Fair Market Value (FMV) is the most common approach. FMV is determined based on several important assumptions including “a highest price” transacted by a “willing buyer and willing seller” with access to the same information about […]
1 min read. Any private company (including non-U.S. companies) that issues equity-based compensation to U.S. employees (and advisors) would need to comply with Section 409A of the U.S. Internal Revenue Code, which essentially requires, among other things, that stock options and other equity incentives issues are not priced below fair market value when issued. How often do companies need to update their 409A valuation? A new 409A valuation must be performed whenever there is a material corporate event, including: – Issuing employee stock options or shares for the first time– Raising a round of funding– Turnover of significant employees in […]