See More: Articles

When is a Business Valuation Needed?

The prospective sale of the company might seem to be the obvious reason for getting a business valuation, but there are many other reasons as well.

money on chess board

Other reasons a business valuation is needed include:

  • Estate, gift and trust planning – To determine estate taxes, a value must be placed on all assets, which include the business.
  • Buy/sell agreements – A buy/sell agreement is an understanding between shareholders of a closely held business that specifies the terms and prices of a buyout when one or more shareholders want to sell.
  • Mergers or acquisitions – If the merger is through the exchange of stock, both companies must be valued to establish a fair exchange.
  • Divorce settlements – Typically, a business must be valued during divorce proceedings. The business is usually given to one spouse while the other receives assets of equal value.
  • Litigation – In addition to divorce, there are other types of litigation that require a business valuation, such as eminent domain proceedings and insurance claims for lost business.
  • Employee stock ownership plans (ESOPs) – An ESOP is a retirement plan in which company stock is donated instead of cash. The value of the stock must be determined annually to establish the employer’s deduction for the contribution.
  • Initial public offerings – When a company goes public, the corporation’s stock must be valued to set the initial offering price.

Because of its in-depth analysis of all factors affecting your company’s performance, a business valuation is an excellent starting point for developing a strategic plan for your company’s future. A valuation will point out areas of weakness and strength, as well as possible opportunities for future growth.

Many businesses use valuations on a regular basis to objectively measure their company’s performance.


Their tagline “Personal Attention Will Never Become Obsolete” sums up every interaction with have with their staff at all levels and the commitment and advice we have received from David Graling and Terri McKnight is exceptional.

AAMFT, Christine Michaels |  Chairman, Principal
The American Association for Marriage and Family Therapy (AAMFT)