As a CFO, I always keep track of the value of a client’s company.  Business owners should be kept abreast of the value of their business on a quarterly basis. Business Valuation can be utilized and needed for the following purposes:

• Obtaining financing
• Company is being acquired or merged
• Shareholder buyout or disputes
• Personal Financial Statements
• Employee Stock Ownership Plans (ESOP)
• Litigation or Divorces
• Conversion of Corporate Status from a C-Corp to an S-Corp
• Estate and Gift Tax Purposes
• Goal setting
• Shareholder Buy and Sell Agreements

The CFO should calculate two different valuations. One valuation is called the Book Valuation. This is the valuation that uses the traditional metrics like sales, EBIT, cash flow and assets. The second valuation is called Synergy Valuation and is defined as a valuation that a strategic buyer would pay. This is a buyer who is in the same business and will be able to take advantage of economies of scale and synergies. This buyer will probably pay a higher price than the book valuation.