Darwin Business Valuation Case Studies
Business Valuations and Divorce
Any divorce is a stressful situation. This stress can be magnified when a business needs to be valued.
Most divorce proceedings require a thorough valuation of both parties’ assets. When a divorce is settled out of the court system these valuations must not only be accurate but also be agreed on by both parties.
What is imperative here is that the outcome of the valuation is completed in an independent and unbiased manner. Divorce proceedings are often drawn out by disagreement based on a difference of ideas in regard to the value of their assets.
This is where the services of Darwin Business Valuations shine. We are able to provide a valuation report that not only shows your business’ value, but all details of the process and data research used to arrive at this conclusion. This allows both parties to have confidence in our valuations.
This example shows how this process can unfold in real life.
Hugh and Sally have decided that a divorce would be the best outcome for both parties. In order to avoid legal fees, the two agree to process the divorce outside of the courts.
Sally owns and operates a medium sized grocery store. She knows that the value of this store will need to be considered in the division of assets. Before the proceedings begin both Hugh and Sally believe that they are in agreement on the store's value.
But as the divorce proceeds differences in opinion arise as to the precise value of the business. Each party has employed accountants to value the business, but they have reached two very different conclusions.
A valuation performed by an unbiased and experienced valuer in a situation like this, would bring both parties to agree in some regard. The experienced valuers at Darwin Business Valuations are perfect for the job as we conduct ourselves in a professional unbiased manner no matter the circumstances.
Owners Remunerations and a Business’s Valuations
Many business valuations are based primarily on income. This fact might give the impression that a business valuation is a simple task but there are many different factors that need to be considered. Our valuers have the experience necessary to know how to value any business.
The following example high lights just one of these factors.
Tamara owned and operated a medium sized printing company. She decided that she needed a business valuation completed for tax reasons and decided that Darwin Business Valuations where the right valuers for her.
Our valuers could see that her business net income was $240,000. They could not take this number as is, however. As Tamara was the owner of her business the salary that she paid herself needed to be taken into consideration.
The $35,000 she paid herself as salary needed to be compared to the salary of other people in a similar position to her so that the market rate of her position can be calculated. Several of Tamara’s characterises need to be taken into consideration:
- Her qualifications
- Her experience
- The hours she worked
- The size of her business
- The number of her employees
Once our valuer has taken all this into consideration, they were then able to determine the market value of Tamara’s position as being $70,000. The discrepancy in her salary had to be taken from her net income to calculate her true business earning as $205,000.
This is just one of the many different factors that our valuers need to take into consideration when preforming a business valuation.
Valuations and Intellectual Property
The team at Darwin Business Valuations can value any part of your business. This extends well beyond your business tangible assets.
A Business intellectual property is an important part of its value, and any valuation needs to take it in to consideration. The standard process used to calculate this value is to first find the enterprise value of the business and then deduct the value of all intangible assets.
The value of each intangible assets can be hard to determine. This calculation requires experience and a trained eye to be completed properly and to the highest of standards and procedures.
But how does this part of a valuation process work?
Sue owns an IT solutions company called Beanstalk Services. Her company has grown from humble beginnings in her garage to an employer of over 20 people servicing various companies around the state.
Sue has developed a new form of software that helps restaurants keep track of bookings and take away orders. This has led to several proposals to license the software as well as a few offers from larger groups to purchase its rights.
Before she can make the right choice, she must know the value of the software both as an asset to be licensed out and as an asset to be sold.
Our valuers where able calculate the collective value of Beanstalk Services intangible assets. From this value our valuer now needed to determine the specific value of the software. This step was the most complicated. It involved complex calculations as well as nuanced decisions to be made. Our valuers had the experience necessary to complete the job.
The calculation for the next value was comparatively simple, a market value approach was used to compare the software to others like it. While less complex than the last calculation it still required an experienced eye to know what other software where similar to Sue’s and how their differences would affect the value.
After Sue had both valuations in hand, she was in a better position to weigh out her options.
Business valuations for the purpose of partner buy-outs.
Partnerships in businesses don’t always last. For various reasons these relationships end and when they do a business often needs to buy back a former partners share. For this to happen a valuation of the business must take place.
This valuation must be completed in a way that both the business and former partner can agree on. Once this is done the negotiations around the share buy-out can then be completed.
This example should serve to further explain this point.
Cohen, Waits, and Associates are a successful law firm that have been operating for over a decade. Due to their success, they have been able to take on two junior partners, each with a 20% share in the firm.
One of these newer partners has taken an offer at another law firm. His departure has forced Cohen, Waits, and Associates to scramble, moving around caseloads and trying to retain clients that the departing partner had built personal relationships with.
To add to their troubles, they also had to negotiate the former partners buy-out. They contacted Darwin Business Valuations to perform a thorough valuation of the whole business and to calculate the value of the 20% share.
Our valuers where able to produce a full business valuation report that both the firm and the departing partner agreed to. From this we took the 20% share and devalued it as according to its minority discount. As the 20% was far from a controlling one the real value was less than 20% of the firm.
While the partner was less than happy with this outcome, he could not argue this our valuation and our methods. Cohen, Waits, and Associates could continue with their work free of worry.
Wills and Business Valuations.
The enacting of a Will is a difficult process. Complex financial issues need to be balanced with a grieving family. The assets of the deceased need to be valued so that inheritance can be properly dealt with.
Many times, this will include a valuation of a business. The following example will better explain how this works.
Frank and Gilbert’s father recently passed. He had started a company that supplies businesses with branded items. It had grown to a respectable level and would now be inherited by the brothers.
Gilbert was living in another state and was already established in another position. The two decide that it would work better if Frank bought out Gilberts share of the company. For this to happen they needed the business valued so that the siblings knew how much compensation Gilbert was owed.
They need a valuation that they could both trust, both brothers wanted a fair value they could both agree on. Darwin Business Valuations where able to provide a comprehensive valuation that allowed the brothers to settle their father’s inheritance swiftly and peacefully.
So, no matter your business valuation purpose we are the trusted firm in Darwin to ensure you receive a service tailored to all your business-related purposes and guaranteed a comprehensive report that best suits your requirements. Contact us today at (08) 7918 0898 or fill in our contact form and one of our team members will be in touch to get the process started.