Tools for Valuing your Family Business
If you and your spouse are divorcing and you need to sell your family-owned business, you might be wondering where to start in terms of determining the business’s value. Your business may be one of your most valuable assets, so take your time and consider your options before leaping at the first offer.
There are a number of tools available for determining the value of a small business. The measure that is possibly the least accurate is the opinion of either spouse. While you both may feel strongly about the business, neither of you is likely to know exactly what it is worth on the commercial market. Instead of arguing about it or guessing, try one of these methods:
- Hire a professional appraiser — A business appraiser looks at the overall past, present and potentially future performance of your business. They consider the tangible assets — such as office equipment, income, real estate and other cash holdings — as well as intangible assets — such as reputation, good will and successful marketing — to determine the market value. They also consider debt such as accounts payable, loans and mortgage. A good appraiser uses a big picture approach that could take several months in calculating.
- Use a computer software program — A less expensive, though more objective, approach is to use one of the many software valuation programs available. The program uses data the owners input regarding income and expenditures of the business, along with other relevant data — and comes up with an estimated market value.
- Take your chances on the market —Your competitors may have an excellent sense of your business’s worth, and you may consider approaching one or more of them first. Sometimes a competing business is happy to acquire a larger share of the market by expanding. If you leak the word that you are selling, wait and see if a competitor approaches you. If not, advertise the sale and see what comes your way.
Selling your family business does not have to be a traumatic event. Speak to a family law attorney about your options.
