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Why Valuation is Important – Right Now

Today’s environment is ever-changing, with the advent and spread of COVID-19 affecting markets across the globe. Almost every company – small, midsize, and enterprise – is being impacted in some manner, and each day brings a new paradigm and shifting business conditions. Now more than ever, setting up a business valuation is an important step you can take for the health of your company, to prepare for the near/mid/long term, as well as to mitigate or eliminate potential negative events or trends under your control.

Return to Fundamentals & Re-Calibrate Expectations
Establishing a valuation sets a baseline for your business, allowing you to navigate your finances and operational requirements with a clearer understanding of where you stand. This comprehensive process is also a fact finding mission. Its purpose is not only to provide a monetary value of your company, but to also detail the qualitative strengths and weaknesses of the business. Imagine the power of charting the course of your business, armed with this kind of information. By understanding your company’s true worth, valuation also becomes a roadmap to future value creation. You will gain clarity on any decision making or resource allocation.

What should you do if you are thinking about selling your company over the next 12 – 18 months?
Consider the new buyer/seller dynamics:
Sharpen your pens, and really consider what value looks like to you and your business.
When in a robust market, value expectations are largely driven by buyer/seller dynamics. Now, however, proving that you can get back to steady revenue generation and steady cash flow will be paramount. In order to do this, you will need to understand your base case and worse case cash flow picture.
This activity may call for recalibrating value expectations and retirement goals. Talk with your financial advisor to determine if you will still have enough to retire if you decide to sell your company – or if your retirement needs/goals need to be adjusted in light of the current environment. For example, you may need to “lock in gains” to avoid possible further downside risk.

Key takeaways: Now more than ever, a thorough valuation of your business by an expert team is a critical step in your company’s health. In a turbulent environment, a valuation can support overall planning and preparation, promote smoother operations, and identify areas to focus on to be best prepared when the market calms and it’s time for a transition.

Dear Partners, Clients and Friends,

At this unprecedented time, I want to let you know that we at Quist are thinking about you. Through our 35 year history we have certainly been through many ups and downs in the financial markets. And, while there are lessons to be learned by examining former market conditions and behaviors, each new crisis brings its own set of unique challenges.

This particular healthcare crisis has left many of us feeling out of sorts – adapting to interrupted routines and isolated from social distancing. We want to ensure you that while we too are working remotely and establishing new norms, we are available to you, as consultants, advisors, and listeners.

I personally want to send a special thank you to all of the nurses, doctors and healthcare workers on the front lines. As some of you know, my mother, after 35 years as an emergency room nurse in Los Angeles, retired and moved in with our family a little over a year ago. Given the incredible demands being placed on our healthcare providers, she has chosen to re-enter the healthcare workforce. This decision was not made lightly, but it is truly noble and part of our family fabric of service to others. In our in-depth conversations about how our individual decisions impact not only those closest to us but also those who don’t know us, we are finding new ways to support others – family, friends, clients, and those who connect with us for guidance.

As you make the difficult and challenging decisions about what is needed for you, your family and your business, know that we are here to share our experience with you. We are wishing you health and serenity.

Sincerely,

Shina Culberson

President

As part of the divorce process, many assets and liabilities will have to be divided between the two spousal parties through a process called equitable distribution. Essentially, a court will classify property as either marital or separate, place a value on the property, and then distribute amongst the spouses. A bank account is an easy item to value. However, if there is a business involved, the process can get complicated. 

Firstly, business valuation for divorce purposes can be much more challenging than valuations for other purposes.

  1. Rules differ among jurisdictions.
  2. There are no clear valuation guidelines in most states (i.e. there is no specific definition of value in state statutes governing divorce). 
  3. Divorce courts exercise a great deal of discretion. 

Secondly, if the business is the primary asset, things can get exponentially complex if:

  1. You own the business with your spouse and you end up being business partners with your soon to be ex.
  2. You have to take out debt on the business in order to meet your equitable distribution obligation.
  3. You’re forced to liquidate the business, eliminating your primary source of cash flow.
  4. You have non-related business partners. 

The good news is that there are ways to protect yourself ahead of time so that your business will survive. You can:

  1. Get a postnuptial agreement. 
  2. Get a buy-sell agreement. 
  3. Keep personal and business expenses separate so the business remains your separate property.
  4. Put the business in a trust to remove it as a marital asset.

Join us at the EPI Rocky Mountain Chapter Event on March 10, 2020, 7:30 am – 9 am to learn more on this topic. Reserve your spot today.

How Businesses Can Drive Value During Ownership Transition with Shina Culberson
BUSINESS LEADERS PODCAST WITH SHINA CULBERSON

There will come a time for business owners to start to entertain the idea of ownership transition. In one way or another, they will have to transfer their businesses to the hands of other owners, carrying over not only the business itself but the employees as well. Shina Culberson, chartered financial analyst of Quist Valuation, talks about the processes of valuation and how businesses can drive value. She covers the importance of creating a culture of innovation among employees starting with the customer mind rate. Sharing as well how they lower the barriers of entry to valuation, Shina provides some actionable and deliverable information to business owners as she shares her business journey.

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