50 ways to create value for business owners and board members

why a valuation should be performed on a regular basis.

here we’ll identify 50 ways that a valuation professional can provide something far more valuable than a number. while the valuation profession is under pressure to reduce costs or prepare a report, the business owner is better served in the long run retaining a valuation professional who provides greater insight to operations.

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the true market value of a business is only determinable when it is sold to an independent buyer – and even then, it is only for that time with that buyer. however, there are many reasons for valuing a closely held business that can provide valuable insights to the owner; these same reasons also underscore how credentialed professionals add value to business owners and board of directors. these are also not commodity services that warrant a low fee.

a business is an important asset of the owners – it provides their living, independence, a degree of financial security and, if properly handled, a payout when the owners are ready to retire. it is often more valuable than the value of their personal residence.

running a business causes owners to make dozens of decisions daily, many times without much advance thought and consideration. unfortunately, it can become easy to lose perspective amid competing priorities and deadlines. having the business objectively and comprehensively valued – leading to a conclusion of value or a calculation of value – provides a look into how others would view the business, the size and scope of the asset that has been created, and identification of important and sometime latent value drives. the process of having the business valued can provide benefits far greater than the nominal cost.

checklist: 50 reasons for valuing a business

to know what the business is “worth”
to have an idea how the market would value the business should you want to sell
to establish a process that would make the company more marketable should the owner decide to sell or when they are ready to sell
to evaluate an offer from someone who has expressed an interest in buying the business
to create a bigger playing field for the owner to assess the results of their decisions or potential for wealth creation
to show how wealth is created and that can indicate a strategic direction to go in
to show how an initial operating cost can become an investment and how it can be recouped by increased value of the business
to place the owner in a position to measure the business in terms of value creation and not on the immediate profit (or loss) from a transaction
to identify value drivers
to possibly uncover areas of the business that can be exploited for greater current profit as well as long-term growth
to identify weaknesses or areas that dissipate value
to establish a buy-sell agreement and a method of automatic adjustments
to update buy-sell agreements
for shareholder or partner disputes
to freeze out minority owners
to consider and use the value in connection with the purchase of business or owner life insurance
to determine built-in gain for conversion of a c corporation to an s corporation
for owners’ personal financial planning
to use in owners’ personal financial statements
to use as a guide to determine retirement or buyout payments to the owner
to indicate the value for credit purposes
to value assets and asset impairment for gaap, that is, financial statement purposes
to be used as a guide to determine reasonable compensation
to plan for a (tax-free) merger with a supplier or competitor
to allocate costs in an acquisition or merger
to assist the dream of going public and capitalizing the business’ value
for gift tax purposes such as ownership transfers to a child, donations to a charity, transfers to grantor trusts, or installment sales to a defective trust
for estate tax reporting purposes
for an estate’s division of assets where the business will go to one beneficiary and to offset assets to another
to assist a beneficiary in selling an inherited share of a business
for succession planning
to set up, or value, an employee stock ownership plan (esop)
for stock compensation awarded to employees including restricted stock and stock option plans (including 409a purposes)
to determine a baseline and value growth for phantom stock arrangements
to value assets in a marital dissolution
for prenuptial agreements
to value a business in a bankruptcy (chapter 11 or small business case)
to distinguish between enterprise (or business goodwill) and personal goodwill
to establish economic damages should there be a loss from a disaster and lost cash flow
to use as a benchmark to measure the business’ “growth”
to provide measures of key numbers and ratios with peer companies
to be used in or to get started with strategic planning
to see if an independent appraiser can uncover hidden value
to determine if there is value greater than, or separate from, the present operations such as strategic value
to indicate how to recognize, maximize, build, or grow and realize full value of strategic value
to raise owners’ mindsets from daily operations to that of creating long-term and sustained value
to understand the illusion of value and ways to make the value a reality. for instance, value can be lost very quickly when exposed to risks such as damage to reputation and regulatory overreach and valuations can assist in identifying the importance of this.
to create a vaster vision for the business owners
to be used periodically as a tool to track the ways value is created assisting in strengthening the business
to help identify whether the business is a growing, stagnant or wasting asset

valuations are serious undertakings and can be extremely revealing; the business owner(s) seeking a low-cost engagement will miss some of the important benefits associated with a valuation by opting to retain a professional to develop the number or value.

when properly and thoroughly done, the valuation engagement has the potential of identifying a host of issues and opportunities with the potential of adding value.

those who own an interest in a business should consider having it valued on a regular basis so that they will gain insight, possibly realign the strategy, and position it to grow and create value.

posted on september 11, 2023

edward mendlowitz

about the author

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edward mendlowitz, cpa, abv, pfs, is a partner at withum, a forward-thinking, technology-driven advisory, and accounting firm. ed has over 40 years of public accounting experience, is recognized as one of the top 100 most influential people in accounting by accounting today, and is the 卡塔尔世界杯常规比赛时间 "practice doctor." his latest handbook for 卡塔尔世界杯常规比赛时间 is 77 ways to wow! the handbook for small-business advisory services.

ed is also the author of "memoirs of a cpa," available at amazon.

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"memoirs" tells his story as a cpa and provides an inside look at what cpas do and how they run their accounting "business." cpas must serve clients effectively and exceptionally, recruit, train, retain and grow staff, and charge fees that clients happily pay because of the value they receive while the cpa earns a living, funds a retirement account, grows infrastructure, and perhaps makes a profit. this book tells how he did all of this and much more.

more ed mendlowitz in the 卡塔尔世界杯常规比赛时间 store:

he is a licensed, certified public accountant in the states of new jersey and new york and is accredited by the american institute of certified public accountants (aicpa) in business valuation (abv), certified in financial forensics (cff) and as a personal financial specialist (pfs). ed is also admitted to practice before the united states tax court and has testified as an expert witness in federal and state court regarding business valuations, and twice at the house ways and means committee on tax reform, fairness, and reduction. a city college of new york graduate, ed earned his bachelor of business administration degree.

he is a member of the aicpa, the new jersey society of certified public accountants (njscpa) and the new york state society of certified public accountants (nysscpa). in addition, ed was a founding partner of mendlowitz weitsen, llp, cpas, which merged with withum in 2005. currently, he serves on the nysscpa estate planning committee and was chairman of the committee that planned the nysscpa’s 100th anniversary. ed, the author of 19 books, has also written hundreds of articles for business and professional journals and newsletters.

he is the contributing editor to the practitioners publishing company’s 706/709 deskbook, the aicpa’s management of an accounting practice handbook, corporate controller’s handbook and wiley’s handbook on budgeting and is on the editorial board of bottom line/personal newsletter and the journal of accountancy member panel on business valuation. appearing regularly on television news programs, ed has also been quoted in numerous major newspapers and periodicals in the united states. he received the lawler award for the best article published in 2001 in the journal of accountancy.

ed frequently speaks to many professional and business groups, including the aicpa, njscpa, nysscpa, american management association, the national committee for monetary reform, the university of medicine and dentistry in n.j., and many more. for 11 years, he taught courses on financial analysis, corporate financial policy and theory, monetary and fiscal policy, and managerial accounting in the mba program at fairleigh dickinson university.

click here for more by edward mendlowitz