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How do I put a value on my small business?

On Behalf of | Aug 10, 2018 | High-asset Divorce

Many men in the Omaha area put a lot of blood, sweat and tears in to their own businesses, often simply because they are doing their best to provide for their families.

Sadly, at the end of the day, they may find themselves in the midst of a high-asset divorce or a long-term separation that seems to threaten their work.

These sorts of situations can be particularly stressful for a man since they likely will mean having to turn over a good chunk of the business’s value over to one’s spouse or, depending on how the business is arranged, one’s significant other. In the case of divorce, doing so is simply part of the fair and equitable division of marital property.

Knowing this, one can see how important it is to have an accurate idea of how much his business is worth. Incidentally, this is also a good idea even when a man is happily married, as the information can also help when doing estate planning or in the event the man needs to consider selling the business for financial reasons.

The key to remember when it comes to putting a value on a small business is that doing so is not just a matter of looking at one’s tax return or adding up business assets and subtracting debts, although these certainly are both parts of the overall process.

Instead, an owner will need to first of all determine how much a business brings in with respect to discretionary earnings, a number that is calculated in dollars and will tend to be higher than the net income reported on one’s taxes. The real trick is to figure out an appropriate factor by which to multiply this number in order to get a lump sum price for the income stream the business provides its owner.

Generally speaking, it is best for a man, with the help of his attorney, to find an expert on valuing businesses to give an estimated sales price. Still, knowing a bit about the valuation process can be very helpful.