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Getting the right value on a family business

On Behalf of | Dec 14, 2021 | Uncategorized |

Many husbands and wives in Lake County are not only run their households and families together but also work together, oftentimes with other relatives, to manage a family business. In many cases, these businesses are the couple’s primary source of income and are also the family’s most valuable asset.

Unlike large, publicly traded corporations, though, family businesses are hard to put a value on. There is simply no equivalent to a share of stock with set market price or even the equivalent of a Kelley Blue Book or set of real estate listings where one can turn and easily calculate how much their share in the family business is worth.

Although the best way to get a value on a family business is to sell it for the highest price offered, sometimes a big life event, including a divorce, a death or serious financial trouble, can effect the family. In such cases, one will need to know how much his or her business is worth, even if there are no plans to sell.

The best way to get a value on a family business is to hire a business evaluator or accountant to give an expert opinion on the net worth of the business. However, even if someone is going to go the route of hiring an expert, it is still a good idea to estimate where one thinks the value will land ultimately.

There are several techniques a person can use to get an estimate on his or her business’s value. Generally speaking, a person needs to account for all the property held in the business’s name, including any outstanding accounts receivable.

However, one also needs to remember that the vast majority of a business’s worth is in its income producing potential, which is why man experts suggest the value of one’s business is some multiple of the profits or gross revenues the business produces.