There are two main ways for business owners to value their company. One is through a business valuation and the other is through a calculation engagement. In a business valuation engagement, the answer is expressed as a conclusion of value. While in a calculation engagement, the answer is expressed as calculated value. For this blog we will focus on the calculation engagement.
This service does not provide a full conclusion of value, but rather a reduced calculation of the value of a company. In addition, the calculation engagement does not provide the same level of assurance as a valuation. However, it is a viable and less costly option. However, there are certainly situations where a calculation engagement is beneficial and we will list those below.
As stated in the NACVA Professional Standards, “A Calculation Engagement occurs when the client and member agree to specific valuation approaches, methods, and the extent of selected procedures and results in a Calculated Value.” The resulting calculated value should not be used for any other purpose or by any other party for any purpose.
Situations Where a Calculation Engagement Is Beneficial
- Buying out an internal partner
- Buy or sell insurance needs
- To fulfill bank needs
- To get a rough estimate of the fair market value of your company, should you be in the process of deciding to sell
What Is Delivered
This service provides the client with a 15-30 page report on the things that are driving the value of the company. It can be used as a strategic way to look at your value today and make changes over a period of time in order to drive the value higher.
How you value your company is up to you. We recommend considering a Calculation Engagement by a Certified Valuation Analyst (CVA). Contact the CVA professionals at LBA Haynes Strand for your no-cost consultation!