Business valuations aren’t cheap, and making sure one of the largest assets in your divorce is properly valued is important. Below is a situation that might bring some clarity as to why a cheap business valuation from the company accountant might not be in your best interest, and hiring a CBV might be in your better interest.
Can the Company Accountant Provide a Cheap Business Valuation?
“I have heard that business valuation is very expensive. My spouse has suggested that the accountant who works for him – and is therefore very familiar with the business – should value it for us so we can save money. Is this a good idea?”
The cost of preparing a business valuation hinges on a number of factors, including what type of business is being valued, how much information is provided, and what level of assurance, or detail, is required. But rather than focusing on the cost of obtaining a valuation, perhaps a better measure of whether or not it might be ‘expensive’ would be to ask yourself what it would cost if you decided to settle on having one prepared by someone who isn’t an expert in the field, or of not having one prepared at all. The money you save now may end up costing you even more down the road in the form of a smaller equalization payment.
A business may be the single most valuable asset in a marriage, so you’ll want to ensure that your business valuation is prepared by someone with training and expertise in the field of valuation, like a Chartered Business Valuator (CBV). Individuals with the CBV designation have received specialized training in the art of business valuation and are recognized by courts all across Canada as experts in the field. Your spouse’s accountant – while knowledgeable about the business – likely doesn’t have the training or expertise to provide a competent valuation.
They’re also missing another key component that must be present in any valuation, particularly one that might go before the courts where many divorcing spouses find themselves – independence. The valuation must be prepared by an individual that can be seen to be acting independently, where their conclusions are not influenced by the presence of any financial incentives. Since your spouse’s accountant would very much like to keep their client happy, they certainly don’t meet that standard.
I would recommend that you seek out the services of a CBV to help prepare a business valuation. Although you may not have a cheap business valuation like you wanted— the benefits of using an expert in the field of valuation will likely be even greater, especially if you need to argue your case in front of a judge. If costs are really a significant issue and the two of you are still on good terms, you could suggest a more collaborative approach by jointly retaining a CBV. That way, you could split costs while ensuring that someone with the requisite expertise is performing the valuation.
For more information finding a cheap business valuation, read our article Under what circumstances does someone need to hire a business valuator?.
Gordon Krofchick, CA, CBV is President of Krofchick Valuation Partners and is a forensic accountant with over 30 years’ experience in working with issues that impact a matrimonial separation, divorce, or other complex financial and litigation issues.