Certain types of business litigation focus on the value of the business, and sometimes even the value of the business before and after specific events. Litigation between partners of a business, divorce proceedings, litigation about harm due to supplier issues, and other situations have as a key piece of evidence the value of the business.
Getting a Business Valuation
There are a number of standards and accepted ways to value certain types of businesses and your accountant, financial advisor, or valuation expert can explain the pros and cons of the different options to you. They might even use multiple methods when reaching a valuation and then suggest, as the number, something in the middle. Valuation methods look at the yearly income of the business, the profits, the accounts receivable, an industry multiplier, and any other unique aspects of the business like a strong brand or marketable intellectual property.
If your litigation hinges on the value of the business, your attorney will likely advise that you contract with an expert in the field. This is someone beyond your accountant who is experienced in appraising and valuing businesses for sale and litigation and would also has experience serving as an expert witness. This person will perform the valuation and write up a report with their findings, reasoning, and supporting documentation. They will be available to be deposed by the opposing party, and help your attorney question any competing experts about their valuation.
There may be a situation where you want to get multiple opinions, from your accountant, to litigation consultants, to an expert who will actually testify at trial. Further, the opposing party may seek their own second opinion. The answers on business valuation can vary wildly, so it’s important for each person to state the methods they used to reach their conclusion, the reason for choosing their version, and any unique factors that impact their assessment.
Comparing Before and After
When you’re discussing economic harm, you may want to do a valuation that looks at the before and after value of the business. Your expert will use the same method to compare the business right before a certain event and in the time after the event. The time-frame used for the after-event valuation will be important as you probably do not want it skewed based on earlier data. This is something you’ll want to discuss with your attorney and expert to ensure you get the most accurate result.
If you’re considering a civil lawsuit or facing the threat of one from another party, the team from Dunn Law Firm can help you and your team review the specifics of your situation and determine the best course of action. Reach out to the Dunn Law Firm by calling (435) 628-5405 and set up a free consultation today.