ValuAdder Business Valuation Blog

Why do conflicts in business valuation arise? When business owners don’t see eye to eye they may be tempted to part company and go their separate ways. Naturally, they would want to be compensated for their share of the business. And this creates the need for a business to be appraised.

If the dispute is bitter, the warring parties may hire their own business appraisers. Moreover, they often try to encourage their appraiser to come up with a valuation that supports their point of view. Unsurprisingly, the results of such business valuations often disagree. If the expectations on the opposing sides are too far apart, they may find themselves in a courtroom.

Time and again, business owners learn their lesson: litigation is uncertain and expensive. If you can, your should avoid settling your disagreements in court. How? Direct the business appraiser you hire to be as objective as possible. Importantly, this means that the appraiser should use a set of reasonable assumptions to arrive at the business value. In other words, do not push an excessive result expecting the court to split the difference. Instead, have your appraiser come up with a valuation conclusion they believe a reasonable outsider would be willing to accept.

If you want others to agree with your valuation, be sure it is credible. Ask yourself these questions:

  • Can we clearly and convincingly state our position?
  • How reasonable is the valuation result?

A conservative number may be lower or higher than what you feel you can support. But it may make it easier to reach an agreement with the opposite side.