Your construction business

Your Construction business may not be worth as much as you think it is…yet!

Do you know how much your business is worth? And by worth, we mean what price it would realize if it was sold today. It is not unusual for business owners to think their business is worth more than it actually is. This difference is often referred to as the value gap. If your business …

Your Construction business may not be worth as much as you think it is…yet! Read More »

Buy Sell

In the absence of a buy/sell clause, everyone gets caught in the crossfire

In my previous post, I talked about what is arguably the most important, but often most overlooked, component of a shareholder agreement – the buy/sell clause. This mechanism establishes the ground rules for the orderly transfer of an ownership interest. I’ve seen a lot of unfortunate situations in my work—shareholders who pass away, become ill, …

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When tragedy struck, these shareholders were prepared

When tragedy struck, these shareholders were prepared

In my last post, I presented a case study about Howard, the owner of a successful manufacturing company. When Howard passed away without a suitable buy-sell clause to ensure an orderly transfer of his ownership interest, all of the business’s stakeholders were caught in the crossfire. These included the other shareholders, his wife and his children. …

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7 reasons why an up-to-date valuation is an asset to your business

7 reasons why an up-to-date valuation is an asset to your business

Many business owners only obtain a valuation of their business when they are considering a sale, or reacting to an unforeseen situation. But there are benefits to always having an up-to-date valuation in hand. It’s a proactive measure that ensures you are acting from a position of strength when the unexpected does happen. Here are …

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A buy/sell clause helps prevent business divorces from getting messy

A buy/sell clause helps prevent business divorces from getting messy

Business partners set up shop with the best of intentions. It’s a relationship that must be built on mutual trust and respect. But no matter how strong a personal or professional relationship is at the outset, shareholder conflicts and other events may occur that can affect the continuity of the business operations. A mechanism and …

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Reasonable Compensation

Reasonable compensation is a key assumption in the valuation model

One of the most subjective and discretionary expenses for many small closely held businesses or professional practices is owner compensation. Reasonable compensation is a key assumption in the valuation model as it can have the most impact on the profits of the closely held business. This is due to the fact that compensation recorded in …

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Restaurant Woes

Restaurant woes: Serving up a disappointing retirement outlook

It seems odd that a business owner would work his or her whole life on their business and then determine the business’s value based on what they “think “the business is worth, or an industry rule of thumb. If the sale of your business is going to fund your retirement you should know what your …

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Business Worth

Your business may not be worth as much as you think it is…yet

Do you know how much your business is worth? And by worth, I mean what price it would realize if it was for sale today. Many times small business owners think their business is worth more than it currently is. This is often referred to as the value gap. If your business represents a significant part …

Your business may not be worth as much as you think it is…yet Read More »

The Income Approach to Determining Business Value

The Income Approach to Determining Business Value

The income approach is often the primary approach used for valuation and is used in the valuation of most operating companies. The income approach discounts the expected future cash flows (returns on investment) to present value using an appropriate rate of return for the investment. Future cash flows are typically based on the net after-tax cash flows expected …

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Capital Gains

The Treatment of the Trapped in Capital Gains in the Valuation of Holding Companies

The issue of how to treat the trapped in capital gains most often shows up when applying the Adjusted Net Asset Approach to valuing a holding company. The Adjusted Net Asset Value Approach is typically used when valuing a real estate or investment holding company. This approach results in the book value of the assets …

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