Business Valuation - What is it?

transcript

5 Major Points

Pharr Valuation & Business Services, LLC 1

5 Major Points

1. Why Me

2. What It Is (What It “Ain’t”)

3. Why You May Need it

4. Business Valuation Overview

5. Case Studies

Legal Stuff / Disclaimer

• I am not a Tax Attorney.• This should not be taken as tax or

estate planning advice, but only as issues and areas to consider.

• You should consult a experienced estate tax attorney when considering any gift or estate tax planning ideas or issues.

• Jewelry Industry - 28 Years • EVP and CFO of Hoover & Strong, Inc.• JBT• 24K Club of New York• JVC• CPA• • • Specialty - Jewelry Industry

• A Business Valuation is an Comprehensive Appraisal of the Overall Value of a Business or Business Interest.

“ It Ain’t “• A Business Valuation is not a:

– Real Estate Appraisal– Equipment or Machinery Appraisal– Inventory Appraisal

• Typical client – Family Owned Businesses– Closely Held Companies.

• Gift & Estate Tax Planning• Succession Planning• Buy/Sell Agreements• Sales/Acquisitions/Mergers• Owner / Stockholder Disputes• Marital Dissolution

• Dec 2012 – Gift & Estate Tax Laws Expire• Business Values are low. You can give

away a larger interest.• Dec 2012 – Gift & Estate Tax Laws Expire• Current Gift and Estate Tax Exclusion is

$5,120,000 per person – 35% Max Tax

• Dec 2012 – Gift & Estate Tax Laws Expire

Purpose of Valuation

Interest being Valued

Standard of Value

Premise of Value

Financial Analysis

Economic Analysis

Company Analysis

Valuation Approach

Conclusion and Opinion of Value

VALUATION REPORT

Trudi’s Fine Jewelry

Naples, Florida

Valuation Date: December 31, 2011

Report Date: February 3, 2012

• Full Valuation Report– Detailed Comprehensive Report– 75 to 100 Pages– Conclusion Of Value for the Appraised Interest– Support Values on a Gift or Estate Tax Return

• Calculation of Value– Less Detail– 20 to 40 Pages– Calculated Value Based on Agreed Upon

Procedures– General Ball Park Value

• Time Frame: Four to Six Weeks• Cost:

– Generally Fixed Fee– Based on the Estimated Time Plus Expenses– Depends on Company Size, Complexity, Condition of

Records– Full Valuation Engagements

• 40 to 60 Hours

– Calculation of Value Engagements • 20 to 30 Hours

• Gift & Estate Planning should be done• Owners need a Succession Plan• Having a Buy/Sell is better than not having

one• There is a mechanism to Fund the plan

• Succession Plan• No Children• One Child• More than one Child who wants to be in the

business• More than one child, some want to be in the

business and some do not.• Gift the business to your children, sell it to them

or do some of both?

Buy /Sell Agreements Selling to Other Owners

Buying Another Owner’s Interest

Selling to Existing Employees

Selling to someone outside the Company

Sources of FundsInternal

Life Insurance

Hit Lottery / Get Lucky While at the Vegas Show

• Death of a Spouse• Death of a Parent• Death/Retirement/Termination

– Family Member or Partner– Succession Plan– Buy/Sell Agreement– Funding

• Marital Dissolution - Owner Disputes

5 Major Points

1. Why Me

2. What It Is (What It “Ain’t”)

3. Why You May Need it

4. Business Valuation Overview

5. Case Studies

Dan PharrPharr Valuation & Business Services, LLC2720 Newquay LaneRichmond, VA 23236-1362Office: 804-332-5458 Cell: 804-370-3040Email: Dan@PharrValuation.comWebsite: www.PharrValuation.com

Business Valuation - What is it?

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