Sale to Employees – Valuation

A Business valuation is usually struck between a willing buyer and a willing seller, however what happens when the ‘buyer’ is a Trust set up for employee benefit? The objective remains the same, namely a fair valuation which reflects the hard work of the business owner, while not over-burdening the ongoing business with onerous debt requirements.

 

A Business valuation is usually struck between a willing buyer and a willing seller, however what happens when the ‘buyer’ is a Trust set up for employee benefit? The objective remains the same, namely a fair valuation which reflects the hard work of the business owner, while not over-burdening the ongoing business with onerous debt requirements.

We believe that achieving such a fair valuation needs two aspects, firstly a suitably deal experienced Virtual Finance Director (VFD) and secondly a good business valuation model.  The deal experienced VFD will be using the business valuation model to generate a fair valuation which when eventually communicated to employees is seen as fair by them.

The business valuation model makes the valuation process transparent and understandable so that key assumptions can be fact checked and verified by both the business owner and the Virtual Finance Director. This process combined with thinking through how to communicate the deal value to employees should generate a fair valuation for both seller and ‘buyer’.

Once the business valuation is agreed, the next part of the equation is can / should bank funding or even equity funding be part of the deal? See our bank funding page for more on this.

Note: You can also download a factsheet on selling a business in html or pdf format.

 

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Business sale to Employees

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