7 questions to ask your valuation expert

Owner-managed businesses often operate differently than they would under independent ownership. Your valuator will identify and normalize these differences, so the valuation reflects what an independent investor would reasonably expect, rather than relying solely on reported profits.

It's important to separate assets essential to business operations from those that are not. For example, if you own the building your company operates in, it might be valued separately, with rent factored into operational cash flow. Understanding this distinction ensures nothing is overlooked or double-counted.

It's easy to miss factors like personal use of company assets or contributions you make that aren't fully reflected in the financials. Proper adjustments for owner compensation, asset-related benefits, and similar items help ensure the valuation is accurate and defensible.

Beyond standard normalizations, consider costs associated with disposing of redundant assets and the tax implications of a sale. Benchmarking against industry standards also helps ensure the valuation reflects an objective view of operations. 

Consider how your business operates today versus how it might run in someone else's hands. For instance, if owners take dividends instead of a salary, a purchaser may need to hire for that role. These potential shifts can impact future cash flow and overall value, so they're worth discussing upfront.

CBVs typically analyze five years of financial history and compare it to industry benchmarks. Stable, consistent performance suggests predictable future value. If there's been volatility, your valuator can help interpret what that means and how it affects the assessment.

A professionally prepared CBV report documents the valuation process and demonstrates that all relevant factors have been objectively considered. This creates a strong defense if regulatory questions arise down the road.