This post contains a collection of the top questions relating to business valuations for divorce, family law and matrimonial disputes.
Is a business valuation still required if the business has little profit?
Even if a business has little profit on the financial statements, a different metric of profit is used in business valuations, whereby adjustments and add backs are often required to determine normalised earnings. Therefore there may actually be normalised profits.
Is a business valuation still required if the business has no profit?
Even if a business has no profit on the financial statements, a different metric of profit is used in business valuations, whereby adjustments and add backs are often required to determine normalised earnings. Therefore there may actually be normalised profits. Even if the business has no profits, a business valuation still needs to be conducted, which may focus on the assets based methodology.
Why can’t my accountant do the business valuation?
This is a common question but business valuations require specialised skills, knowledge and experience. Accountants are expected to be well versed in a large number of accounting and tax considerations, whereas business valuation experts specialise in business valuations
Why can’t we just use an estimate of the business value?
The value of the business is often a contentious issue, and is often exacerbated by differing views, sometimes wildly differing views. Additionally, it is common for one party to be involved in the business and the other party to have very little or no working knowledge of the operations of the business. An independent business valuation is a method of reducing tension in the dispute around the value of the business as an independent unrelated expert provides an independent expert report and opinion.
What is the appropriate date for the business valuation?
The date of the business valuation will be determined in accordance with instructions from the instructing solicitor(s). Often it is a current business valuation but for certain reasons the date is sometimes at a prior point in time.
Is the business valued as a going concern?
Yes, generally business valuations assume that the business is a going concern. If the business is not profitable, this may assumption may be challenged.