Business owners typically want to maximize the selling price when it’s time to cash out — and buyers may be willing to pay top dollar if the company is positioned for future growth. This article discusses how valuation experts can help owners understand their strengths and weaknesses, allowing them to boost bargaining strength with potential buyers over the long run.
There are three general ways to value a business: the cost, income and market approaches. This article focuses on the market approach, comparing and contrasting two methods that fall under it: the M&A method and the guideline public company method. Both have intuitive appeal, as well as various downsides, so they’re not applicable in every valuation assignment.
The question of reasonable compensation is frequently debated in shareholder disputes, divorces and IRS inquiries. Owners’ compensation can vary significantly from company to company based on many factors, such as the owner’s education, licenses, training and salary history; the business’s size; and industry trends. This article explains five factors courts use to determine whether an owner-employee’s compensation is reasonable. Typically, a determination of reasonable compensation is objective, unbiased and based on relevant empirical data.