Posts in ‘Business Valuation’

strageic acquisition just askIn a recent post, we discussed the significant difference between the financial acquisition value and the strategic acquisition value of a privately held company.  Obviously, before you can convert your company into an attractive strategic acquisition candidate, you have to learn just what that means in your industry.  But, how can you do that?  You certainly can’t just walk up to a key acquisition executive and ask, can you?

Actually, with a few important modifications, that’s precisely what you can, and should, do!  Well, not you personally, because it will be important to keep your company unidentified.  Just have a trusted advisor conduct these interviews on your behalf.

Once you and your team have developed a list of likely buyers, design a questionnaire that will take no more than 15 minutes to complete on the telephone.  The questions you ask will largely depend on your industry and the data you want to gather on where these executives think the industry is headed.  However, two questions will be common to all questionnaires, irrespective of the size of your company or its industry.

  1. If you were to acquire a company in this industry today, which strategic assets would be most valuable to you?
  2. How are these preferences like to change over the next few years?

If your interviewer talks to enough acquisition executives (15-25 should do it) and compiles the responses, s/he will have put together the profile of the attractive strategic acquisition candidate from the perspective of the marketplace.  Next, conduct a “gap analysis” that compares this profile with the strategic profile of your company.  In other words, how does your company stack up on each strategic asset regarded by a number of interviewees as important?  In most cases, your individual strategic asset ratings will fall roughly into three categories.

  1. We are in very good shape, and need only fine tuning.
  2. We have made significant strides, but we have a long way to go.
  3. We are pretty close to the starting blocks.

Once you have made these judgments, you can decide which strategic assets to acquire and/or enhance in order to move your company’s strategic profile closer to what the marketplace has specified.  Consider these possible scenarios.

  1. Many interviewees indicate that they would be very interested in acquiring a leading regional company in your industry, but not a local one.  This would suggest that acquiring one or more companies in your industry or, perhaps, merging with a larger competitor elsewhere in your region, would make the equity in your company much more valuable.
  1. A number of executives indicate that some important product development opportunities are stalled because the components currently available in the market are technically inadequate.  One or more of these components is within your company’s technical expertise.  This information could affect your strategic product development effort in a very positive and targeted way.
  1. You have been planning to expand into a new market niche, and have narrowed the choices to three that appear to be roughly equally promising.  The interviews yield the information that one of these three would be considered very valuable to many prospective buyers.  Case closed.

Once you have made these decisions, you need only incorporate them into an effective strategic plan, complete with areas of individual responsibility, deadlines and standards of performance.  Good luck!

PhotoPopell This article has been contributed by Steven D. Popell. Steve has been a general management consultant since 1970. Steve is a Certified Management Consultant, business valuation expert, and inventor of ExiTrak®– a process designed to assist the privately-held company owner/manager to build an attractive strategic acquisition candidate

IP Strategy – Getting Started

by Thomas Frasher on October 2, 2009

Intellectual Property Strategy

This article is a three part article on the need for a cohesive strategy for creating, developing, protecting and managing your companies intellectual property.

In previous articles I illustrated the ways to protect your intellectual property in the United States by availing yourself to the US Patent and Trademark Office. These articles were the beginning of the process. In this first part of a three part series I will cover the importance of creating a comprehensive Intellectual Property Strategy that will protect your market and your investment. As I have said many times before you need help to do this! And, you need the best help you can get! That said again, lets dive in!

Review of Concepts:

Let’s first review some basics:

1. What is a patent? A patent is a legal monopoly granted by the government to exploit your intellectual property for a specified time. A patent can cover a device, a process or any composition of matter created by a human being. It must
be novel and non-obvious and it cannot have already been rejected.

2. Types of patents: There are three types of patents in the US: Utility, Design and Plant. Utility patents cover most things that have function, design patents cover the outward appearance and plant patents cover asexually
reproduced plants. In the interest of full disclosure I have never worked on an Plant patent, nor do I know anyone that has, if that is your forte’ good luck and you are on your own.

3. What is a copyright?  A copyright is a law or laws that gives you ownership of the things your create. These are generally creative works including but not limited to: books, pictures, poetry, paintings, photographs and the like. The copyright gives you the right to reproduce the creation, distribute, create derivatives, perform or otherwise display publicly the work you have created.

4. What is a Trademark? A trademark is a type of intellectual property comprised of a distinctive symbol, sign or indicator used by an individual, business or other legal entity to help the consumers of the product or service
distinguish between themselves and others.

Need for a IP Strategy:

A cohesive IP strategy provides several things all are protective.

1. A strategy provides the direction for new development

2. A strategy provides the boundaries where your innovation can flourish without the intellectual and more importantly financial distractions can be reigned in.

3. A strategy defines where you specifically are going and also importantly where you are not going.

All these together save your business cash, time and effort while protecting your marketplace, your brand and your time.

Getting Started:

The get started developing any strategy you must first know your ultimate goal, until this is achieved you are working only with tactics, working without purpose; this is especially true when working with Intellectual Property, a mis-designed strategy will lead to wasted effort, resources and lost time.

Strategy must also be discerned from tactics, a distinction that many fail to understand. Strategy is the plan of actions, practices, roles and situations that must be produced to reach the ultimate goal. Tactics are the individual actions, practices, roles and situations that are performed in support of the Strategy to reach the ultimate goal, tactics may include interim goals along the way. That said the first step is to decide on your ultimate goal. Be specific; remember you are designing the future, so it’s big stuff you are doing here. With IP tactics include finding a good IP attorney, organizing your portfolio, determining your product roadmap, writing disclosures, working with developers, working with clerks and writing. All of the above items require you to get help.

Do It!

Step 1. Design your Ultimate Goal (i.e. Create A IP Portfolio for protecting and exploiting …..)

Step 2. List all the tactics needed to achieve that goal. (i.e. contact IP attorney, setup meetings, write disclosure, ….)

Spend quality time on Step 1, this is the most important step. The more clearly you define the strategy the more you will be able to see if your tactics are betraying your intention and you can correct to maintain alignment of your tactics to your ultimate goal.

Protecting Your Inventions Before You Patent

by Thomas Frasher on September 25, 2009

Documenting Inventions
notebook
In my last article is wrote that a laboratory notebook is an effective method for ensuring that you protect your intellectual property during development. This article comprises guidelines to help protect the integrity of the contents of your notebooks such that the contents are without reproach.

In patent law it is generally the first to conceive of an idea that is awarded the patent, a properly kept notebook is often the first documented evidence of a concept, development or process.

Generally speaking it is adequate to have a small drawing and some descriptive text to document a concept. The lab notebook aids with extending that concept in a protective manner.

Guidelines:

1. Take your notes contemporaneously with your development, as close to the time of your research or lab work as possible.

2. Remember that you are working to make sure that someone with your skill level can recreate what you’ve done, solely from the notes in the notebook.

3. Very few people organize their notebooks efficiently, with the possible legal outcome in mind. Remember: the lab notebook is your first line of defense.

4. If you need to have a blank page for some reason, draw a diagonal line and write “Void” on the line, initial and date the line. It is best however to avoid blank pages.

5. VERY IMPORTANT: IF you make a mistake, do not scribble over it, draw single line through the error and initial and date the line. you can do this for large areas by lining through at a diagonal and, again initialing and dating the line. At no time is it acceptable to remove any part of or all of a page. This will call into question the contents of the notebook as a whole.

6. When spanning multiple pages use “(Continued)” or “(Cont)” at the top of the page to denote a continuation from the previous page. If you are continuing something from an earlier page use “(Continued from page #)” or “(Cont from #)”.

7. Avoid fragmentary notes, make sure you use as complete a description as you can.

8. All entries are either in ink or printed and attached to the page with tape or glue. If attaching a page to the notebook, draw a line across the boundary of the attachment and the page and initial and date the line, this ensures that the date of the attachment is in congruence with the dates in the notebook.

9. Your writing must be legible. If someone else can’t read it, it must be redone. If it is illegible it might as well not exist. Remember you are writing to the future in your notebook, it must be clear.

What To Put In the Notebook:

1. Table of Contents. Leave room at the front of the notebook if there isn’t an explicit table of contents. Keep this up to date. This helps with finding information quickly in the event of a search through multiple notebooks (a very common occurrence).

2. Include a list of your assumptions as you begin.

3. Include any formulae or calculations that are important to your work.

4. Data, drawings, sketches, processes, procedures, notations, corrections, part numbers, assemblies, code snippets, tests, test results, etc. In General your thinking.

All of the above items are relatively easy to maintain once you get the mindset that you are writing to the future, in addition to the present.

Go get a notebook, set down and innovate, create and invent! It’s fun!

Image Courtesy: Paul Watson on Flickr

compensation_reward_strategy_pictureThe most frequent approach to valuing a sole practitioner’s private practice is the “Excess Earnings” Method.  In this method, excess earnings represent Total Practice Earnings (salary + bonus + company profit) in excess of the sum of “reasonable compensation” and a reasonable return on the practice’s Net Worth (Assets minus Liabilities.)  When the estimated value of excess earnings is multiplied by a factor (the multiple) reflecting the relative risk of the earnings stream, the result is goodwill.  Goodwill plus Net Worth equals the total value of the practice.

While the excess earnings method itself is quite straightforward, determining what constitutes reasonable compensation is anything but.  Even “experts” can draw vastly different conclusions on this topic.  Clearly, if there is no agreement on what level of compensation is reasonable, there can be no agreement on what is excess.  This post will seek to demystify this question and clarify the process.

The Excess Earnings Method is based on the principle that the vast majority of the value of a sole practitioner’s private practice is the capacity of the practice (the practitioner) to generate net income after all expenses.  This principle is common to virtually all types of businesses. The difference here is that this method requires that the earnings of the practice be compared to those of “comparable” practices.  The following scenario will help to illustrate the fundamental issue in this comparison.

You, the sole practitioner, have decided to take a year off and sail around the world on your boat.  {To simplify this example, we will assume that Net Worth = $0}  Your task as CEO is to hire a person with identical skills and experience to manage your business, and to provide all the services your clients require.  This individual would be neither an owner nor a partner in your firm.  What would you have to pay this person?

Let’s assume that you could hire an equally competent replacement for yourself for $150,000 per year.  If your Total Practice Earnings = $400,000, Excess Earnings = $250,000.  The difference between the non-owner’s compensation and your Total Practice Earnings reflects the benefits of ownership.  In other words, you compensate yourself at the $400,000 level not because that reflects market rates, but simply because you own the company, and you can.

While the concept and the basic calculation are easy to grasp and implement, the problem arises in determining precisely what constitutes market rates.  There are two ways to do so.

  1. Find at least one economically similar practice that employs a practitioner of comparable skills and experience to you.  Where such arms-length financial arrangements exist, they represent best evidence.  Unfortunately, such direct comparisons are typically few and far between.
  2. Much more common is to rely on the estimates of other sole practitioners in your field as to what such a non-owner employee would earn in their practices.

The lynchpin of both avenues of inquiry is the identification of one or more economically comparable practices.  By what standards does one determine comparability?

First, the practitioners must be practicing in the same or closely related specialty, however unusual or thinly populated.  To compare a transplant specialist with a cross section of general surgeons would be of little help.

Second, the backgrounds and credentials of the practitioners must be quite similar.  This does not mean that they went to the same medical school or had virtually identical residencies.  However, one cannot very well compare someone who is board certified in a specialty with one who is not.  Nor is one likely to find a helpful comparison between individuals whose time in practice varies by 15-20 years.

Third, economically comparable practitioners must function at about the same skill level, and be so recognized by their peers.  Fortunately, the narrower the specialty, the better known are the few leading practitioners and, therefore, the easier it is to obtain such judgments from colleagues.

It is important to keep in mind that we are not comparing the Total Practice Earnings of similar practice owners.  That would defeat the basic objective, which is to determine the incremental increase in Total Practice Earnings resulting from self-employment.  Only by making that determination can we determine the value of ownership in the private practice and, as a result, the value of the practice itself.

PhotoPopellThis article has been contributed by Steven D. Popell CMC (Certified Management Consultant.) Steve has been qualified as a business valuation expert since 1974, and has published extensively on this topic. CMC, a certification mark awarded by the Institute of Management Consultants USA, represents evidence of the highest standards of consulting and adherence to the ethical canons of the profession. Steve was a 2007 winner Collaborative Practice California Eureka Award for contributions to Collaborative Practice in this state.

Documenting Inventions

by Thomas Frasher on September 14, 2009

A few weeks ago I wrote a series of articles on protecting your intellectual property. Today’s article is the beginning in a series that discusses how to protect your inventions before the patents are filed.
Long ago simply keeping the invention to yourself was adequate protection, this is no longer the case. If you can create an invention, some one else can create the same thing with the same amount of effort. In the end it all comes down to when you invented it and your ability to document when you created your invention.
The main method of protection to use when inventing is the laboratory notebook. There are many vendors for laboratory notebooks on the internet, prices range form a few dollars a piece to well over $100 (listing at the end of the article). This is not a place to save money, nor is it a place to break the bank.

Important Qualities in Lab Notebooks

  • Hard bound – This is more for the protection of the contents of the notebook.
  • Stitch Bound – It is important that the notebook show any evidence of tampering.
  • Preprinted sequential pages numbers.
  • Embossed book numbering.
  • Preprinted grids or lines on each page
  • Signature and confirmation block at the bottom of the page. It is important that each page has a signature block for counter signature.

Lab Notebook Rules

  • Only one lab notebook open per person at a time.
  • Lab note books are filled out contemporaneously, any gaps in time will cause questions t if a review is necessary.
  • A list of notebooks and who they are issued to must be kept.
  • Every pages must be signed and dated.
  • If you need to attach a printout to any page, use tape to affix the attachment to the page, then draw a single line that traverses from the attached page to bound page. Signed and date on the line. Any signature without a date is invalid.
  • No skipped pages. This is very important, any gaps, as in #2 above will create questions if a legal review is necessary.
  • Lab notebooks must be stored securely, remember, this is the history of your invention.
  • One final guideline – Start writing in your lab notebook early. In a legal conflict the earliest date wins.

What Goes in a Lab Notebook?
The simple answer to this question is “everything”. Everything that is that can be attributed to the invention you are working on. And several inventions can share a lab notebook.

What Does Not Go in a Lab Notebook?
Non-project related data – don’t write a grocery list in the book.

Partial List of Lab Notebook Suppliers:
http://www.bookfactory.com/
http://www.snco.com/lab.htm
http://www.eurekalabbook.com/Standard.html
http://www.laboratorynotebook.com/

Summary:
For documenting your inventions, grab a good notebook, get a good pen, and start writing. More next week on the maintenance and upkeep of your lab notebook.

What’s In The Name

by Robert Driscoll on August 20, 2009

2008-01-28-domain-real-estate-istockphoto572188-400x300Many different areas of business have been covered in the past several weeks on Activegarage.com from the dance of entrepreneurship , creating and protecting your intellectual property, to protecting your company’s data .  Our goal is to help people transform their world by coming up with uncommon offers in the marketplace. 

So, now you’ve come up with the next breakthrough and are ready to take your first step as an entrepreneur.  You’ve come up with a name for your company and have set up a corporation.  You’re excited.  Financial freedom is just around the corner.  You go to register your company’s domain name and you come to find out…someone already owns it.  Don’t give up. 

Here are some simple steps to help you to continue moving forward.

1.     Change Your Domain Suffix

If .com is not available, look to see if any of the other domains are available (.net, .biz, etc…).  Be careful though as you might be in violation of a possible trademark infringement if the other domain in use is a legitimate business.

2.     Change The Name Slightly

Work on finding variations of the name you want until you find one that is available.  Again, be careful with this option as well as you could also be in violation of a possible trademark infringement. 

3.     Buy The Domain Name

Domain names are bought and sold all the time at sites like GoDaddy.com or BuyDomains.com.  Having the right domain name online can help establish your company’s identity.  Determine what the value of building your brand without being able to use the company name and domain you desire and compare that to what it would cost to buy the domain you want.  If the latter is less, simply buy the domain and continue moving forward. 

4.     If You Already Own The Trademark

If you already own the trademark to your company’s name, you have some options.  If you are dealing with a cybersquatter, the first, and less expensive, option is to contact ICANN and file a dispute under the Uniform Domain-Name Dispute-Resolution Policy.  The cost to go this route varies as it depends on the number of domains filed in the dispute and the number of panelist required.  You can also send a cease and desist letter to the party that is “squatting” on your desired domain.  A sample letter can be found here .  While this process might be time consuming and cumbersome, it is considerably less expensive than the final option. 

5.     Seek Legal Advice

When you’ve exhausted all of your options, this might be the only one remaining.  Before going down this path, consider the time and money it might take if you try to resolve this matter with the “help” of an attorney.  If this goes to court and you win, you could have all or part of your legal expenses paid for by the other party, but be careful as you could very easily lose and incur legal expenses and still not have the name you wanted for your business. 

Unfortunately there is no one way to resolve this issue, but it is important to understand that you do have options should you encounter this problem.  It is just as important to determine how much time and money you are willing to invest before you go after the name you want.  Sometimes it’s just easier to come up with a new name.

business graph increasing profitsIn a previous Active Garage post, we discussed the importance of ensuring that the sale of your company is a strategic, rather than a financial, one.  This article will present the prototype of the strategic “hot property.”  While the strategic assets that are most valuable will vary with the industry and the individual buyer, comparing your company’s strategic profile with this ideal can help you to begin the process of building its strategic value.

Key Areas of Potential Strategic Attractiveness

  • High Profitability
  • Outstanding Financial Condition
  • Rapid Earnings Growth
  • Rapid Sales Growth
  • Outstanding Industry Reputation
  • Geographic Market Dominance
  • Service Offerings
  • Market Niche Dominance
  • Unique Marketing Channel(s)
  • Strategic Alliance(s) and/or Joint Venture(s)
  • Potential Acquisition Hub
  • Key Customers
  • Technology
  • Broad and Deep Management Team
  • Modern Management Style and/or Techniques

Details by Functional Area

General Management

  • Outstanding CEO with long track record of P&L success, excellent instincts and judgment, and a first-rate knowledge of, and reputation in, the industry
  • An executive one step below (preferably COO) with at least 90% of the CEO’s attributes (#1 above)
  • An excellent executive heading up each of the existing functional areas (breadth of management) and an excellent working relationship among them:
    • Marketing
    • Finance
    • Product Development
    • Purchasing
    • Operations
    • Human Resources
  • A #2 executive in each existing functional area capable of moving up to #1 (depth of management)
  • Modern management style and techniques, such as:
    • Clear vision
    • Clear mission
    • Clearly articulated long-range goals
    • Previous three items well understood throughout the organization
    • Flat organization
    • Effective bottom-up input
    • Financial and other incentives
    • Effective information sharing with employees

Marketing

  • Industry leader, and recognized as such, in the following areas:
    • Product offerings
    • Customer service, including technology
    • Relationship of price to value received by customer
    • Market share
    • The place where competitors’ key sales people want to come to work
  • High-quality / low-cost producer; competitive price leader
  • Consistently ahead of the competition by at least one product cycle
  • Excellent information on all key competitors and the nature of competition
  • Technology used effectively to leverage, monitor, and forecast marketing and customer activities
  • Excellent press and analyst relationships
  • Positive visibility in the press
  • First-rate presentations to the marketplace, including:
    • Website
    • Printed materials
    • Trade show booths
  • Strategic alliances – partnerships appropriate to customers, marketing, sales, manufacturing and services

Sales

  • Sales team highly motivated and well compensated
  • Sales compensation program designed to maximize Gross Margins
  • Technology used effectively to leverage, monitor, and forecast sales activities
  • Highly effective territorial coverage
  • Outstanding relationships with key customers

Finance

  • Outstanding financial condition / balance sheet, including:
    • Cash – substantial for company of its size
    • Quick Assets – substantial for company of its size
    • Quick Ratio – at least 0.7:1; preferably 1:1 or better
    • Current Assets – substantial for company of its size
    • Current Ratio – at least 2:1; preferably 3:1 or higher
    • Working Capital – indicative of extraordinary liquidity
    • Net Worth – substantial for company of its size
    • Ratio of Equity to Long-Term Debt – at least 2:1
    • Ratio of Total Debt to Equity – no more than 2:1; preferably 1:1 or less
    • Debt Coverage – at least 2:1
    • Average Age of Accounts Receivable – no more than 30 days
    • Average Age of Accounts Payable – no more than 45 days
  • Long history of excellent P&L results, including:
    • Sales increases of at least 25% per year, every year, for 5 years
    • Upward trend in Gross Margin as a percentage of Sales, with most recent year and current year well above industry averages and trending upward
    • PBT increases of at least 25% per year, every year, for five years
    • Selling Expenses at least 2 percentages points below industry average
    • G&A at least 2 percentages points below industry average
    • Earnings per share calculated on a fully diluted basis, including all stock options granted, but not exercised
  • Excellent banking relationship

Operations

  • First-rate inventory management that optimizes both inventory levels and delivery times
  • Interchangeable parts (cross-training) throughout the operation
  • Industry leader in technology
  • Well documented processes
  • Outstanding QA
  • ISO 9000 certified

Customer Service

  • Rated by independent customer survey as outstanding
  • Reliable, and consistently used, methods to determine customer satisfaction
  • Prompt and effective responses to instances of customer dissatisfaction, whether justified or not
  • Industry leader in technology
  • Well documented processes

Human Resources

  • No potential for significant contingent liabilities, including:
    • Complete and clear employee handbook that covers all important company policies, procedures and employee benefits
    • All job candidates go through a complete background check
    • Effective and well publicized policy on sexual harassment
  • Periodic and formal personnel reviews that are on time and well documented
  • Credible policy of promoting from within whenever possible
  • Claims administration that is consistent and fair
  • All paperwork up to date and accurate

Clearly, no company can be perfect in all these diverse functional areas.  But, if you utilize this check list to advantage, you will be well on your way to increasing the strategic value and, hence, the sale price of your company. Good luck.

—–

PhotoPopell This article has been contributed by Steven D. Popell. Steve has been a general management consultant since 1970. Steve is a Certified Management Consultant, business valuation expert, and inventor of ExiTrak®– a process designed to assist the privately-held company owner/manager to build an attractive strategic acquisition candidate

Collaborative-PracticeThe frequently destructive effects of litigated divorce, especially on minor children, are well known. While the lawyers get much of the blame, the fault really lies with a legal system that, all too often, turns adversaries into enemies and spouses with common interests into winners and losers.

It doesn’t have to be this way.

There is an alternative that can provide all the legal protections of a court process, minus most of the downside. It is called Collaborative Practice (CP), and it deserves your close scrutiny. CP is different from litigation in three important ways.

1. The spouses agree in writing not to go to court. If either party abrogates this agreement, all professionals must withdraw.

2. The spouses agree in writing to provide all relevant information, whether requested or not.

3. While the final settlement must be filed with the court, the couple, not a judge, makes all decisions.

There is a core team of professionals, including an attorney for each spouse, a coach for each spouse, a neutral financial professional and, if there are minor children, a child specialist. When there is a family business, the couple retains a neutral business valuation specialist.

With a neutral, two draining elements are greatly reduced – cost and stress.

The Cost is cut down as the hourly rates for financial and mental health professionals are typically much lower than those of family lawyers, the cost for CP is often less than with litigation. In addition to that, neutral business valuation is much less expensive, because there is only one expert, rather than two; and finally, there is no need for depositions and court appearances and, therefore, legal fees are also cut substantially.

The Stress from a protracted battle over the value of the business can take a heavy emotional toll. The non-manager spouse can feel over matched and at sea in a situation so laden with numbers and financial concepts. The manager spouse is often genuinely afraid that buying his or her spouse’s community property interest in the business will kill the goose that is supposed to be laying the golden eggs. Rival experts can exacerbate these fears and misgivings.

Not surprisingly, the business valuation professional in the Collaborative environment is quite different from the one that delivers an opinion in court. Here are a few of the key differences.

1. The function of this professional is to help the divorcing couple to agree on a value for the business that they understand and believe is fair.

2. The professional is free to deliver a preliminary report, which is open to criticism. If either spouse can make a persuasive case that revisiting an issue, reviewing a document or interviewing a person may have a material impact on the opinion, the expert should be happy to do so. This can never happen in court, where defending one’s opinion is the order of the day.

3. The expert is also able provide a range of value, rather than a specific dollar amount. This option is advantageous for two reasons.

• It is easier for the couple to agree on a range than on a number. Once this threshold is crossed, agreeing on a point within the range should be well within their grasp.

• A range of value allows the spouses to juxtapose business value and spousal support in ways that are beneficial to both parties. For example, a young spouse with a high paying job will often want to maximize the value of the business for use in an investment or retirement vehicle. S/he would probably be willing to sacrifice something in spousal support to achieve this goal. An older spouse with limited income prospects may be primarily interested in maintaining the lifestyle that the business has supported. This individual can afford to give a little in the value of the business in order to maximize spousal support.

When retaining a neutral business valuation specialist, the couple must make two key decisions: the valuation date, and the level of service. In court, the valuation date is typically selected because it is close to the date of separation (business highly dependent on the efforts of the spouse) or to the date of trial (many others, besides the spouse, contribute to the financial performance of the company.) In Collaborative Practice, neither of these markers need be dispositive. Rather, the decision revolves around practical issues, such as proximity to the end of the calendar or fiscal year, at which time the quality of financial information is usually much better than at other times during the accounting year.

In Collaborative Practice, the expert can offer a number of choices in service that accomplish different objectives and cover a wide range of cost. For example, if a valuation opinion were for court, the IRS or some other official body, an official opinion may be required. That is almost never the case in Collaborative Practice, and an unofficial report is much less expensive. In some instances, it is necessary only to review financial documents, rather than cover the entire business landscape – another way to save money. It is not necessary to satisfy a judge in this matter. Rather, the question is: What makes sense for the couple and their available resources?

My future posts will add detail regarding business valuation in the context of Collaborative Practice. In the meantime, if you or someone you care about is entering a divorce process, Collaborative Practice should be front of mind. You can learn more about this important option by visiting the Collaborative Practice website. The site will also help you to find Collaborative professionals all over the U.S. and around the globe


PhotoPopellThis article has been contributed by Steven D. Popell CMC (Certified Management Consultant.) Steve has been qualified as a business valuation expert since 1974, and has published extensively on this topic. CMC, a certification mark awarded by the Institute of Management Consultants USA, represents evidence of the highest standards of consulting and adherence to the ethical canons of the profession. Steve was a 2007 winner Collaborative Practice California Eureka Award for contributions to Collaborative Practice in this state.