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Did you know that valuing a small business is sometimes a more challenging task than valuing a large company?  These types of valuations commonly arise in buy/sell transactions and divorce cases with marital property divisions, although they also come up in shareholder/partner disputes and other matters. Clients can have concerns about the cost of valuation, but attorneys and valuators can work together in a case to set and meet realistic client budgets and provide credible valuation. Considering a valuation? Here are a few things to keep in mind.

Valuation Standards.  Just like attorneys, accredited valuators are bound by standards of professional conduct. However, none of those standards distinguish between a valuation for a small business (and perhaps small budget) and a larger business. Once engaged, valuators sometimes find themselves caught between performing a complete and credible valuation, complying with the applicable standards, and keeping the job within a client’s budget. In disputes, valuation experts may be cross-examined on whether they adhered to the professional standards. If the answer is no, a lack of client funds is no defense, and the expert’s credibility as well as the client’s case could suffer.

Managing Expectations. Open communication with the client at the outset is just as important in the valuation as in the legal context. Valuators can help attorneys to inform the client why the business appraisal is necessary, its potential costs and the benefits for the client and case. Clients—especially in the emotionally-charged divorce setting—can sometimes have misguided expectations.  These clients need to receive the proper information and guidance from their professionals as to the scope of the valuation engagement, its process and the problems it can solve—as well as those it can’t, including creating value in a business when in reality there may not be as much as the client anticipated or hoped.

The Cost of Discovery. Few things can drive up litigation costs and fuel conflict faster than trying to compel another party to comply with applicable disclosure and discovery rules. At the same time, the other side may be genuinely frustrated by receiving an overly broad discovery request. Valuators can work with attorneys and the client  to narrow the scope, so  the experts will receive all  the documents they need—and none of those they don’t. Documenting clear, successive requests for production to the opposing party will also help if  a motion to compel or an interim motion for fees becomes necessary.

Why Experience Matters. Sometimes our initial due diligence reveals discrepancies, calling into question the integrity of the accounting records and tax returns presented. In these instances we often reconstruct one or more of the financial components to best estimate the business’s profit potential. We have significant case experience and techniques to find facts, probe discrepancies, and help resolve delicate situations where perhaps both sides have benefited in the past, yet the future may be more relevant.

Jeff Denning is a partner at Gilmore Jasion Mahler, LTD and leads the Firm’s forensic accounting and business valuation practice.  He has specialized in valuation and forensic services since 1997 and has provided expert reports and testimony on private company stock valuations, appraisals of professional practices, accounting investigations, and economic damage calculations. Learn more about Jeff’s expertise.

With an increase in M&A activity in recent months it may be wise to get a business valuation done so that if and when an opportunity arises you're ready to respond. But who should do the work for you and how in depth a report does your business need? Gilmore Jasion Mahler Partner Jeff Denning specializes in business valuation and says be aware that the IRS or a court of law will have some requirements when it comes to the valuation, and who does the work. He offers some ideas on how to go about choosing the right person for the job.

Who does a valuation for your business is one of several important questions as you begin to research the process. For more information, see GJM's video blogs How Do You Figure Out the Value of Your Business, Business Valuation: Lengthy Report or Not, and What is the Business Valuation Process. Learn more about Jeff’s expertise in business valuation and forensic accounting, and don’t forget to sign up for GJM’s free quarterly newsletter The Expert with a focus on business valuation and litigation support. Just click here for quick and easy sign up.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. 

Gilmore Jasion Mahler, LTD (GJM) is pleased to announce the addition of a new partner, several staff promotions, and some additional new team members in recent weeks.

Ryan Leininger, CPA, CVA recently joined the firm as a consulting and assurance partner. Ryan is a graduate of Defiance College, where he received his undergraduate degree. He obtained his master’s in accountancy from Bowling Green State University and brings to his leadership role over 16 years of experience in public accounting. His areas of specialization include construction & real estate and manufacturing & distribution. Ryan is also a Certified Valuation Analyst (CVA).

Other staff promotions, effective January 1, 2022 include:

Heidi Ferguson, CPA promoted to tax senior manager, Alex Spieker, CPA promoted to assurance senior manager, Ben Lochbihler, CPA promoted to senior manager, Dana Lumbrezer, CPA promoted to assurance manager, Kim Rodriguez, CPA promoted to tax manager, Tim Merkel promoted to IT manager and Travis Reamsnyder, CPA promoted to tax supervisor.

New team members in recent weeks include Charlie Kettinger, assurance senior associate, Shelby Lashaway, administrative associate, Lindsey Stoots, administrative associate, and several tax team members including:

Matthew Alic, CPA, tax manager

Shobhana Govindarajan, senior associate

Arlena McDaniel, EA, senior associate

Dana Frost, senior associate

Robin Maas, associate   

“To those just joining the firm: Welcome to the GJM team. I’m also very pleased to see so many of our valued team members grow in their roles within the firm,” says GJM Managing Partner Kevin Gilmore.    

There are currently several opportunities at GJM for those just beginning their careers, and for more experienced professionals in tax, assurance, and risk advisory. Learn more at GJMLTD.com/careers.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.