Business Valuation
Prepared by Your Licensed CPA
Knowing what your business is worth — supported by a defensible, professionally prepared valuation — is essential for transactions, tax planning, shareholder arrangements, estate planning, and litigation where the value of your business must be established with credibility. Manay CPA prepares business valuations for every purpose.
- Business Valuation for Sale, Purchase, Estate, Litigation, and Financing Purposes
- Income, Market, and Asset Approach Analysis With Full Documentation Included
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Rigorous, Defensible Valuations
For us, a business valuation is not a number pulled from a formula — it is a professionally reasoned conclusion that reflects a thorough understanding of the business, its financial history, its industry, its competitive position, and the standard of value applicable to the specific purpose for which the valuation is being performed.
Context-Specific Business Valuation
A business valuation is required in a wide range of contexts — the sale of a business, the purchase of a business by a buyer who needs independent value confirmation, a shareholder buyout, estate and gift tax filings that include a closely held business interest, divorce proceedings where a business interest is a marital asset, litigation involving a dispute about value, and financing transactions where the lender requires a documented value conclusion. Each of these scenarios demands a specific technical approach to ensure the final figure is both accurate and legally defensible. By applying industry-leading methodologies, we provide the clarity needed to navigate these high-stakes transitions with absolute confidence.
The three primary approaches to business valuation — the income approach, the market approach, and the asset approach — each measure value from a different perspective. The income approach values the business based on its capacity to generate future economic benefits. The market approach values it by reference to comparable businesses or transactions. The asset approach values it based on the fair value of its underlying net assets.
Manay CPA applies every applicable approach and reconciles the results into a final concluded value with documented rationale for every weighting decision. We prepare valuations at three levels — calculations of value for internal planning, restricted use reports for specific agreed purposes, and comprehensive reports prepared to standards required for tax authority submission or litigation support.
Unverified Valuations: The Scrutiny Risk
A business value estimate produced without professional methodology — a multiple of revenue applied without analysis, an earnings multiple from a generic reference, or an asset-based calculation that misses intangible value — is not a valuation. It is a guess dressed as analysis, and it will not survive scrutiny from a tax authority, an opposing expert, a sophisticated buyer, or a lender.
Defensible, Professional Methodology
Manay CPA’s valuations are prepared with documentation standards that allow every conclusion to be traced back through the analysis to the underlying data and professional judgments that support it. Every comparable selected, every assumption made, every discount or premium applied, and every methodological choice is documented, disclosed, and explained.
Our valuations are prepared to withstand scrutiny from IRS examiners, opposing experts in litigation, sophisticated buyers conducting due diligence, and institutional lenders evaluating collateral. The level of documentation and analytical rigor applied to every engagement reflects the scrutiny the valuation may face — never less than what the purpose requires.
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Managing wealth is more complex than tracking a standard portfolio. For those navigating business interests, real estate, and lifestyle goals, financial success requires a cohesive architecture rather than isolated decisions. Without a unified strategy, disparate assets can work at cross-purposes, leading to inefficiencies and missed opportunities.
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Table of Contents
The Standard of Value Determines What Every Business Valuation Is Actually Measuring
Fair market value — the price at which a business would change hands between a hypothetical willing buyer and a willing seller, each with reasonable knowledge of the relevant facts — is the most widely applied standard for tax purposes, estate planning, and many transaction contexts. Other standards apply in specific contexts and produce different results because they are based on different assumptions.
Manay CPA identifies and applies the correct standard of value for every engagement based on its specific purpose — fair market value for gift and estate tax and most transaction purposes; fair value for financial reporting and some litigation contexts. The choice of standard is documented and explained in every valuation report as it fundamentally affects the conclusion.
Discount and Premium Analysis Adjusts Every Concluded Value for Ownership Characteristics
The concluded enterprise value of a business is not always the value of the specific ownership interest being valued. A minority interest — one that cannot control operations or compel a distribution — is typically worth less than a proportionate share of the enterprise value. A non-marketable interest — one that cannot be readily sold — is typically worth less than an otherwise identical marketable interest.
Manay CPA analyzes the applicable discounts and premiums for every ownership interest valuation — including discounts for lack of control, discounts for lack of marketability, and control premiums in the appropriate contexts — based on empirical data from the professional valuation literature and the specific facts of the interest being valued.
Normalization Adjustments Reveal the True Earnings Power of Every Closely Held Business
The financial statements of closely held businesses frequently include items that reflect owner preferences rather than the economics of the business — above-market owner compensation, personal expenses run through the business, and one-time items not representative of ongoing performance. These items must be normalized before any income-based valuation can produce a reliable indication of value.
Manay CPA identifies and documents every normalization adjustment for every income-based valuation — explaining the basis for each adjustment and its impact on the normalized earnings figure that forms the basis for the valuation conclusion. Every adjustment is supportable with reference to market data, industry norms, or specific facts about the business.
Frequently Asked Questions
What is a business valuation and when do I need one?
A business valuation is a professionally prepared determination of the economic value of a business or ownership interest, supported by documented analysis of the business’s financial performance, assets, and industry conditions. You need one when selling or buying a business, triggering a buy-sell agreement, making a gift of a business interest, filing an estate tax return, supporting a divorce proceeding, applying for an SBA loan, or resolving any legal or financial matter requiring a professionally supported value conclusion.
What are the three approaches to business valuation and which applies to my business?
The income approach values the business based on its ability to generate future income. The market approach values it by comparison to similar businesses or transactions. The asset approach values the underlying net assets. For most operating businesses, the income and market approaches are primary. The asset approach is more relevant for investment holding companies and real estate entities. Manay CPA applies every applicable approach and reconciles the results.
How is a closely held business valued differently from a publicly traded company?
Publicly traded companies have market prices established by continuous trading — making their equity value directly observable. Closely held businesses have no public market and must be valued through analytical methods. Closely held business valuations also typically require adjustments for lack of control and lack of marketability that do not apply to freely traded public company shares.
How long does a business valuation take to complete?
A calculation of value for internal planning purposes can typically be completed in one to two weeks. A restricted use valuation report takes two to four weeks. A comprehensive valuation report prepared to tax authority or litigation support standards typically requires four to eight weeks from receipt of complete financial information. Manay CPA provides a timeline estimate at the start of every engagement.
Can a Manay CPA business valuation be used for IRS purposes including estate and gift tax filings?
Yes. Manay CPA prepares business valuations meeting the IRS’s qualified appraisal requirements for estate and gift tax purposes — including a description of the property valued, the standard and premise of value applied, the valuation date, the appraiser’s qualifications, and the approaches and methods used. A qualified appraisal is required to support closely held business interests on estate and gift tax returns.
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