While there are some out there who may mistakenly believe that a business valuation is only important if you’re actively in the process of selling or buying a business, this couldn’t be further from the truth. In reality, business valuations may play a role in a number of different situations, many of which are known in the business world as “triggering events.”

At My Biz Value, we’re happy to offer the very best business valuation services and tools in the industry, with a business valuation calculator that has a number of different quality features and uses. Our services are regularly utilized during triggering events; what do we mean by this term, and what are some examples of triggering events where business valuations are often vitally important? Here are some basics to be aware of.

What Are Triggering Events?

Within the context of business, a triggering event is typically defined as any situation where financial data (such as the value of the company and several other related areas) is required for tax or legal purposes. In some cases, a triggering event may also refer to any type of dramatic change that takes place within the business, such as the death of a key employee or manager. In others, it may simply refer to a major change in the business landscape that affects the company, such as a recession.

In any case, it’s important to realize that there are many different types of triggering events that may come up, and each one will have its own unique set of circumstances and requirements. And in many cases, the need that’s being “triggered” is a full, proper valuation of the company in question. Our next several sections will go over some great examples of such events.

Transactions

As you may have already guessed, any kind of major business transaction is going to be a perfect example of a triggering event. After all, when you’re buying or selling a business (or merging with another company), there’s going to need to be an accurate understanding of the business’s value before any of these deals can go through.

This is where our business valuation services come into play; we’ll work with you to get a full understanding of your business, its financials, and what it’s worth in today’s market. We’ll then provide you with a detailed report that outlines all of this information, along with our own professional recommendations. This will give you the data you need to move forward with any kind of business transaction quickly and easily.

There are several kinds of business transactions where valuations play a major role:

  • Buy-sell agreements: The most common type of business valuation, buy-sell agreements are often put in place by businesses as a way to ensure that the company can continue running smoothly in the event that one of the owners dies or is otherwise forced to leave the business. By having a detailed, accurate valuation on hand, you can be sure that the right price is being paid out in these situations.
  • Mergers or acquisitions: If your business is looking to merge with another company, or if you’re on the other side and looking to acquire a business, valuations are going to be key in order to ensure that the right price is being paid. After all, you don’t want to overpay for a business, nor do you want to sell your own business for less than it’s worth.
  • Financing a new business: In order to get the financing you need to start up a new business, you’re going to need to have a good understanding of what that business is worth. This is where our valuation services come in handy; we can help you put together a comprehensive, accurate picture of your business’s value, which will in turn make it much easier to get the financing you need.

Litigation Situations

Another common type of triggering event where business valuations play a role is in litigation situations. When businesses are involved in lawsuits, there’s often a need to determine the value of the company (or specific assets) in order to come to a resolution.

For example, if your business is being sued for patent infringement, the court is going to need to know the value of your company in order to determine how much damages to award. If your business is being sued for breach of contract, on the other hand, the court is going to need to know the value of the specific assets in question (such as machines, software, or inventory) in order to determine how much you owe the other party.

Tax Reporting

It’s also common for business valuations to be used for tax reporting purposes. In many cases, the IRS will require businesses to have a current valuation on hand in order to properly report certain assets (such as stock options or restricted stock).

Not only that, but business valuations may also come into play if you’re looking to take advantage of certain tax deductions. For example, if you’re looking to donate a piece of property (such as office space or equipment) to a charity, the IRS is going to need to know the fair market value of that property in order to determine how much of a deduction you can take.

All in all, it’s clear that business valuations can play a role in a wide variety of different situations. Whether you’re looking to buy or sell a business, finance a new venture, or simply report your taxes accurately, our team at My Biz Value can help. Contact us today to learn more about our valuation services and how we can help with your trigger event.