Calculation of Value: Why it’s important for your Business

Jul 9, 2020Business, Business Valuation

Are you aware of your company’s value?

COVID-19 has been a trying time for businesses and may be the right time to take advantage of business transition opportunities. With the current economic situation, gifting programs should be evaluated because of lower company values. Smith Schafer can assist with this evaluation by performing a business valuation. There are three options for business valuations:

  • Detailed Valuation Report
  • Summary Valuation Report
  • Calculation of Value

All three of these options are a bit different in content and investment, and each will provide a value or range of values. 

Depending on the company’s needs, something less lengthy and comprehensive may be the perfect option. A calculation of value is less in scope, investment of time, and cost.

What is a Calculation of Value?

A calculation of value report provides an approximate fair market value of a business using data from comparable business, the earnings capacity and cash flow of a company, and valuation professional judgment. The application of a valuation approach will calculate a value or range of values of an entity. The calculation of value may be a written or oral report. It is an ESTIMATE of the value of a company. 

Pros of a Calculation of Value

  • Cost-effective.
  • Helpful for tax compliance as it relates to estate and gift tax if a preliminary value is needed for planning purposes.
  • Provide the business owner or their advisors with the estimated value of the business.
  • The value is a range or a single number.

Cons of a Calculation of Value

  • Only one or two valuation methods used to compile.
  • Will not include all the procedures of the other reports.
  • The report is not as detailed as the other reports.
  • Restrictions on the intended users of the report.

Most business owners are reactive when it comes to having their businesses valued. But there are many times it pays to be proactive. For example, in today’s economy the value of a company may be less than it was, which may allow for gifting of more shares under the annual gift tax exclusion. On a lifetime basis in 2020, an individual would be able to gift more within their $11.58M lifetime gift tax exclusion. And if they have a spouse, this amount is $23.16M. This increased CURRENT gifting could save substantial money in the future.

It is crucial to have a business valued by a credentialed valuation professional. Smith Schafer works with business owners, in multiple industries, to uncover the true value of their companies’ tangible and intangible assets.


Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.

Trending Posts

Subscribe to our Blog

Related Industry Posts

document Organization for Your 401k Plan Audit

document Organization for Your 401k Plan Audit

s discussed in part two of our 401k blog series, one of the purposes of a retirement plan audit is to ensure the plan operates in compliance with both plan documents and IRS and DOL regulations. To do this, your auditor will request access to several documents. Some will be plan-specific documents, while others will be HR and related documents.

read more
2022 Business Valuation Considerations

2022 Business Valuation Considerations

More than two years after COVID-19 changed the world, business valuations are still challenging. At the midpoint of 2022, the idea that things have returned to ‘normal’ is certainly debatable. In many instances, historic valuation inputs, specifically past performance, cannot be taken as an indication of future performance.

read more
2022 IRS Backlogs & Taxpayer Service Updates

2022 IRS Backlogs & Taxpayer Service Updates

The IRS has been busy. In the past two years, the agency has processed trillions of dollars in pandemic relief funds, adjusted to often-changing tax deadlines, and dealt with several complex new tax laws. At the same time, funding was 20 percent lower than in 2010. Understaffed is the understatement of the century.

read more

Subscribe to our blog


We appreciate your interest in Smith Schafer and would love to hear from you.So please complete this form or feel free to email us directly at: [email protected]