One Valuation Expert in a Business Mediation
Many people have questions about how to use one valuation expert in a business mediation. Recently I had a client come to me to discuss a business valuation for his online marketing company. He said he wanted to partner with his long-time best friend, but most people said it was not a good idea. They had been best friends for 10 years and about 5 years ago he started a marketing business that was becoming wildly successful. His friend had kind of watched the success from the sidelines, but also had an amazing amount of creativity and was a brilliant photographer. The friend brought a unique perspective to the business venture – and they knew they would be more successful together, if they could agree to what the partnership looked like. So the business owner wanted the friend to buy-in to the partnership, but when they started talking about the money – the conversation became very awkward.
They were talking about how much the business was worth, what would the partnership agreement look like, how would they split the money or profit each year? As you can imagine, when friends start to talk about business and money, the conversations start to get pretty difficult. I mean when strangers talk about money or buying something – like a car – we all go into master negotiator mode and don’t want to pay a dime more than we have to. Even the beginning discussions started to strain the friendship. Here is where I entered – sort of as a business mediator, but really as a third-party valuation expert – a neutral person in the process I reviewed the financial statements and sat down with both of them to review some of my views on the financial past and future. Then we worked together to understand how a valuation is done and forecast the future.
Once we agreed on the projections and how to value this business – not only for this buy-in – but also for the future, then I was able to tell them what the number was and there was very little disagreement from either friend. Because you see, if I do my job right, no one is really happy or sad about the value, it is a fair number. We also developed a framework to value the business every year, in case one person wanted to exit in the future. They also knew they may want new partners in the future as the business grows. There are ways to do the valuation analysis quickly and for a reasonable price, using technology and having both people share in the cost of the valuation. By hiring one expert to help you evaluate the business – you can start to work together, as opposed to fighting about the number and feeling like someone won and the other person lost.
We provide business mediation services and valuation services in St. Louis, as well as other parts of Missouri, Illinois and around the country. If you have any questions about mediation, strategic planning or buy-sell agreements – give us a call or text your question to 314-541-8163 or check out our website at http://www.ValuationStLouis.com
