advisory & consulting

how to begin a business valuation

woman wearing glasses, using calculator in front of two computer screens and a window

includes a sample preliminary document request.

by ed mendlowitz
the 卡塔尔世界杯常规比赛时间 practice doctor

business valuation is performing appraisals of businesses for many uses and reasons.

forensic investigations relate to disputes that are in or will lead to litigation.

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who needs this service

this service is for anyone engaged in litigation or where the value of a business is an issue, such as partnership and marital dissolutions. also, valuations are necessary in many instances where there are tax-motivated transactions, particularly in the gift and estate tax arena and employee compensation situations.

annual valuations can also be prepared for the personal knowledge of a business’ owners serving as a measure of the growth of the business, and perhaps to be used as a guide to uncover hidden or underutilized value triggers.

forensic investigations can also be used as a control feature or for preventative measures.

why the accountant is suited to offer these services

in order to perform credible valuations, the accountant needs an accreditation from a reliable source. this would entail demonstration of the ability to perform these services and involves extensive continuing education.

many, if not most, non-litigious business valuation assignments are tax-motivated. most of the accountants we know who specialize in business valuations were originally tax people.

preliminary document request for a business valuation or for a consultation engagement

this list is preliminary and upon receipt and review of the information we may need to request additional documentation.

this request also applies to any related or affiliated entities or entities with common ownership that does business with the entity being valued.

if any information does not exist please state that. if any information is not immediately available, please indicate when it could be expected. you can black out the names of customers, suppliers and employees if you wish.

we would prefer to have this information either emailed to us, or provided on a cd that is sent to us. however, any format is acceptable.

  1. valuation date:_____________________
  1. purpose of valuation or consultation:

__________________________________________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

  1. all shareholder, partnership or members’ agreements in effect as of the valuation date and through date of this request.
  1. copy of the stock certificate or the legend, if any, appearing on stock certificates issued to the people transferring the interests being valued.
  1. listing of all the locations business is conducted from.
  1. organizational chart, if any.
  1. all employment, consulting, management or any other agreements in effect during last five years and through the date of this request.
  1. financial statements, if any, for the most recent five fiscal years with the accountant’s or accountants’ reports, and any financial statements issued after that date with an accountant’s or accountants’ reports
  1. federal and all state tax returns for the most recent five years, including all schedules, statements, forms and attachments.
  1. copies of the w-2 and 1099 forms for the two immediately preceding years.
  1. aged schedules of accounts receivable and accounts payable and accrued expenses as at the end of the last two fiscal years.
  1. listing of five largest customers for each of last three years and sales to them each year.
  1. listing of five largest suppliers for each of the last three years and purchases from them each year.
  1. copies of any contracts with customers or suppliers currently in effect.
  1. copies of any commitments to buy equipment.
  1. copy of all loan applications from the beginning of the second preceding fiscal year through the date of this request, including all statements and attachments.
  1. copy of all loan agreements, covenants and notes from the beginning of the second preceding fiscal year through the date of this request, including all statements and attachments. we will need a schedule of the loan covenants and your compliance with them as of the end of the last fiscal year. we also need copies of any bank correspondence after the loan was issued regarding your performance under the loan agreements.
  1. copy of any agreement, outline, term sheet or proposed agreement for which this valuation is required, if any; or, if for estate planning or wealth transfer purposes, a listing of the individual gifts that are contemplated.
  1. independent appraisals of any real estate.
  1. independent appraisals of any equipment. in the event that equipment values are not significant we would accept in lieu of the appraisal a representation letter by the company’s management of what amount we should accept as the value of the equipment in connection with our valuation.