Determining Your Valuation Need
Some of the most common reasons for exiting a business include :
• Your retirement
• Selling your business ( in whole or in part ) – maybe to a relative , employee , third party or another company has expressed interest
• Gifting your business ( in whole or in part ) for estate planning purposes
Depending upon the purpose of your business valuation , more and less intensive valuation options are available .
Types of Valuations
The two broad categories of analyses business valuation experts provide are calculation engagements and valuation engagements .
1 . Calculation Engagement In a calculation engagement , a valuation expert estimates the value of a business by applying valuation procedures agreed upon with the client and using professional judgment as to the value or range of values based on those procedures .
2 . Valuation Engagement In a valuation engagement , a valuation expert estimates the value of a business by applying the valuation approaches they deem appropriate for the business .
Valuation Reports
There are a few options available for valuation presentation . The simplest of which is a set of schedules , detailing the approach ( es ) relied upon and showing the supporting mathematical computations , with limited narrative support provided . In several instances , this limited report type may be adequate ; however , this would never be permissible under Internal Revenue Service ( IRS ) reporting requirements , such as for gift or estate tax purposes .
An additional option is a summary report , which is a narrative report that includes commentary on the company background , limited economic data and discussion of the valuation approaches utilized .
Finally , the most intensive report is the detailed report . A detailed valuation report provides a narrative description of the subject company , economic data , a discussion of valuation approaches , detail of applicable discounts , and in general , a more thorough narrative analysis when compared to a summary report .
Here to Help
Whether you need a simple “ back of the napkin ” business valuation or a more detailed valuation report , our dedicated valuation experts can help . Contact us to learn more about our valuation services . ■
Please note , a valuation engagement is typically more thorough and time-intensive than a calculation engagement , as a full valuation often entails more procedures and analysis . The value determined under a calculation engagement may not be the same as the value determined in a valuation engagement .
Issue 1 | 2023 VIEWpoint 7