As a result of the need to ensure and evaluate successful creation of wealth, many privately-held and family-owned businesses, particularly those that have survived multiple generational transfers, have instituted a policy of having an independent business appraiser/financial analyst conduct an annual valuation of the firm.
Many firms of various sizes and different phases of the corporate life cycle online property valuation have recognized the benefits of having an annual valuation conducted. The most commonly cited benefits of an annual valuation policy include the following:
o Accountability and Performance-An annual valuation of a privately-held firm enables the shareholders to see the value that is being consistently created or destroyed by the management of the firm in its execution of the corporate strategic plan. Over time, if the executive management of the firm consistently fails to create value through the increase in the estimated fair market value of the company’s shares, the shareholders may seek to replace the management team with a group more capable of executing the strategy and creating value for the shareholders. In addition, an annual valuation may enable the shareholders to identify the need for substantial change to the strategic plan if that plan consistently fails to create the level of value anticipated. Overall, the annual valuation promotes accountability and provides clear performance measurement.
o Estate Planning Purposes-Many shareholders in privately-held enterprises have on-going estate planning strategies aimed at protecting wealth for heirs. As part of an estate plan, a shareholder may periodically place shares into a family limited partnership whose shares are then gifted to the shareholder’s children. A shareholder may also make gifts of shares to the children each year for tax purposes. In order to facilitate this, an annual valuation of the privately-held enterprise provides the shareholders with part of the data necessary for these estate planning purposes.