Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

My company is only worth what?

More often than not, when a small business owner looks at the value of their business determined by a business appraiser, they are in total shock at the concluded value. Sometimes they are pleasantly surprised by a value higher than expected. Other times they insist their company is worth much more than the appraiser has determined. Illusions of grandeur sometimes are at work here. There is just no way their life’s work is worth any less than $10 billion!!! I exaggerate for effect of course but some small business owners don’t really have a grasp on reality when it comes to the value of their business.

Other owners may have a better grasp on reality but still expect the value be higher. After all, they have had a steady income for years. What these owners have not considered are the risks associated with their business that a buyer would consider. Specific Company Risks are attributes or factors associated with a specific company. All else being equal, a company with more negative (or riskier) specific company attributes will be worth less than a company with fewer risks.

Melissa Loughlin-Sines, CPA, CVA, CFE