Tasmania Business Valuation Case Studies
Small Business and Divorce
Many divorce proceedings involve a business. Whether a business is owned by one or both of the parties going through the divorce, the business value must be known so that a fair division of assets can be assured.
A divorce settled inside or outside of a court will require a precise value put to all assets the former couple owns. It is in every one’s best interest to have this valuation completed promptly and in a manner that both parties can agree to.
Starting at a point of precise agreement, the two parties can then continue the difficult process of a divorce with at least this potential issue resolved.
This illustrative example should help to show the importance of an independent business valuation.
Jackson and Patricia had been married for over 15 years. 5 years into their marriage they started a business selling office supplies. Over the next decade the business had grown to the point that it was able to provide both with a steady and secure income.
Both Jackson and Patricia had made the difficult decision to separate. They decided that the best option was to settle the divorce out of the courts so they could avoid any unnecessary fees. They could see that the biggest point of contention between the two of them would be the valuation of their business.
Jackson and Patricia first asked their regular accountant if she would be able to value their business. Their accountant let them know that she didn’t have enough experience in this field and was too close to both parties. That is when they turned to us.
Our valuers never fail to conduct their valuations in an unbiased and rigorous fashion. In cases like these we can collect all relevant data and calculate the precise value of the business. Out of this process a business valuation report is produced that not only details a business’s value but shows exactly how your valuer was able to reach their conclusion.
Jackson and Patricia where able to proceed with their divorce with an agreement on the value of their biggest asset. There were other disagreements along the way but both parties were satisfied with our valuation outcome.
Business Valuations and Wills
Dealing with the implementation of a Will can be a difficult and complex process. On the one hand an executor must deal with large amounts of financial information while on the other, they will be working with a grieving family.
It is important that an executer has a detailed understanding of all the different assets affect by the Will. Many times, a business will be chief amongst these assets. In these cases, a valuation must be conducted in a way that returns a reliable value and satisfies all potential inheritors.
The following will better explain this process.
Victor and William’s mother has recently passed away. In the 1970s she had started a furniture store that grew to the point that it now operated in several states. Victor and William now stood to inherit the successful business.
Victor had worked with his mother very closely over the last decade and was key to the business’s recent growth. William, however, now lived overseas and was well established in another field. The two brothers decided that it would be best for Victor to buy-out Williams share.
This now meant that the furniture company would need to be valued so that Victor would know exactly how much he needed to compensate William for. Neither brother wanted any friction to come from this process, naturally Victor didn’t want to overcompensate his brother but also wanted to be sure that William felt he received the right amount.
The services of Tasmania Business Valuations are perfect for a case like this. Our valuers are able to produce an unbiased valuation report that both brothers can agree on. We know that situations like these are delicate. Both groups are hoping for a different outcome but at the end of the day both need to trust the valuation that was performed.
That is exactly what happened here. Our valuer was able to calculate the precise value of the business and using this value the siblings were able to settle their inheritance quickly and peacefully.
Business Restructuring and Tax
It might at first seem that a simple internal restructuring does not require a business valuation. In our experience you are better safe than sorry. Your tax obligation can change with even the simplest restructure and if this change is not properly delt with your business could be liable for back tax and fines. That could cost you thousands.
The following example will show exactly what we mean.
One Cone, Two Scoops was an ice cream store specialising in classic flavours and old-world charm. The business was started by Mr. Philips almost 30 years ago and had grown into a local institution. One Cone, Two Scoops had been managed by Mr. Bon for the last 13 years and under his leadership the business had continued to grow.
One day Mr. Bon came to Mr. Philips with a new idea. He wanted to open another One Cone, Two Scoops in another town. He believed that there was room for growth and a new store could drastically increase the business value and future potential.
Mr. Philips liked the idea. He liked it so much he wanted to bring Mr. Bon in as a part owner of the entire business. After meeting with his accountant Mr. Philips decided that a business valuation would be needed to ensure that One Cone, Two Scoops could continue to properly fulfill its tax obligations.
Our valuers were able to complete a comprehensive valuation of the business. With this in hand Mr. Philips and his accounted where able to protect themselves from any possible fines or back tax.
The new store successfully opened and was quickly followed by plans for a third location. One Cone, Two Scoops was now in the right position to continue its growth, now with two owners.
Business valuations and buying out a former partner.
Not all Business partnerships last. For any number of reasons, a formerly strong and profitable business relationship can come to an end.
In these cases, a business needs to buy back the share of the departing partner but before this can be accomplished the business itself must be valued. This valuation must satisfy to often opposing parties, the remaining partner or partners and the departing one.
The following example will show how this process might unfold in the real world.
The law firm Young, Shepherd and Dean was started in the 1990s and over that time had managed to grow to the point that two junior partners were added to the team with a 10% share in the company each.
Unfortunately, one of the junior partners had accepted a position at a rival law firm. The firm was now busy moving caseloads and retaining important clients that the departing partner had built a personal relationship with. Moreover, they need to negotiate the buyback of the partner’s share.
The first step was a business valuation. To find the value of a 10% share they need to know the value of the whole. Our team was able to perform a detailed and reliable valuation that produced a report that clearly stated the firms value, and all details of our calculations were in the report.
More than this our valuers were able to calculate what a 10% share was worth. As the share was far from a controlling one our valuers needed to take minority discounting into consideration. This meant that the partners 10% was not worth 10% of the company.
Obviously, the former partner was not happy with this outcome. However, he could not argue with how the final value and report outcome was reached.
In this case our values where able to provide a service that allowed Young, Shepherd and Dean to get back to doing what they do best as quickly as possible.
No matter your business valuation purpose we are the trusted firm in Tasmania to ensure you receive a service and comprehensive report that best suits your requirements. Contact us today at (03) 6311 1868 or fill in our contact form and one of our team members will be in touch to get the process started.