Business Valuation

Reasonable Compensation

Reasonable Compensation

One of the most subjective and discretionary expenses for many small closely held businesses or professional practices is owner compensation. Reasonable compensation is a key assumption in the valuation model as it can have the most impact on the profits of the closely held business. This is due to the fact that compensation recorded in the Company’s books and records and presented in the financial statements is not always at market rates and it is …

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Importance of a Buy/Sell Agreement

Importance of a ShareHolder Buy/Sell Agreement

Business partners set up shop with the best of intentions. But no matter how strong a personal or professional relationship is at the outset, shareholder conflicts and other events may occur that can affect the continuity of the business operations. A buy/sell clause in the shareholder agreement that is understood by all the parties is an important tool that provides a mechanism and process to ensure an orderly transfer and the continuity of the business …

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7 Reasons Why an Up-to-Date Valuation is an Asset to your Business

7 Reasons why an Up-to-Date Valuation is an Asset to your Business

Many business owners only obtain a valuation of their business when they are considering a sale, or reacting to an unforeseen situation. But there are benefits to always having an up-to-date valuation in hand. It’s a proactive measure that ensures you are acting from a position of strength when the unexpected does happen. Here are some reasons why you should have a current valuation of your business: You are ready if you receive a purchase …

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When Tragedy Struck, these Shareholders were Prepared

When Tragedy Struck, these Shareholders were Prepared

In my last post, I presented a case study about Howard, the owner of a successful manufacturing company. When Howard passed away without a suitable buy-sell clause to ensure an orderly transfer of his ownership interest, all of the business’s stakeholders were caught in the crossfire. These included the other shareholders, his wife and his children. Today, I have another case study that ends on a more positive note. Why? Because these shareholders did it right …

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In the Absence of a Buy/Sell Clause, Everyone gets Caught in the Crossfire

In the Absence of a Buy/Sell Clause, Everyone gets Caught in the CrossFire

In my previous post, I talked about what is arguably the most important, but often most overlooked, component of a shareholder agreement – the buy/sell clause. This mechanism establishes the ground rules for the orderly transfer of an ownership interest. I’ve seen a lot of unfortunate situations in my work—shareholders who pass away, become ill, succumb to substance abuse, endure personal crises that derail their business focus, or simply fail to fulfill their obligations to their …

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