Our Business Valuation specialists take the viewpoint that traditional accounting practices only reflect a business’ past and are unable to capture neither the current circumstances nor the future of a business.
Those practices were developed during a time when businesses value was seen only in tangible resources such as buildings, equipment, or the transformation of raw materials into intermediate and finished products. In our current knowledge-based economy, companies are far more likely to have created value via intangibles and intellectual capital resources (examples would include proprietary processes, brands, relationships and knowledge).
Today, traditional asset based accounting represents only 25% of the market value of a company (when 20 years ago, it was 80%), due to this antiquated system being unable to measure most intangibles and nearly all kinds of intellectual capital. Business Valuation, in comparison, is able to identify and quantify all the hidden value in a business enterprise.
The true value of your business is not merely its assets minus its liabilities.
True economic value considers both tangibles and intangibles (such as goodwill, intellectual property, name and reputation, human capital, etc.). Take human capital, from an accounting perspective, it is virtually impossible to monetize. While it is theoretically possible to calculate value in terms of future cash flow generated (through the review of historic trends), this approach would be viewed as extremely speculative, if applying old-fashioned accounting methods. Yet, professional valuation standards necessitate that such consideration should be undertaken.
Obtaining and retaining the value of your business, however, is not a simple undertaking. It demands a thorough understanding of valuation, as defined by the Internal Revenue Code, federal and state tax law, Treasury regulations and case law. It also requires the ability to both identify and quantify the hidden value within a business enterprise.
Let our knowledgeable, qualified and skilled associates assist you. We can provide an accurate professional valuation capable of withstanding IRS scrutiny as well as one that is legally defensible.
As they say, your best defense is a strong offense!