It is important to get a fair and accurate valuation of your business to ensure the divorce financial settlement reflects the reality of your situation. The risk of inaccurately reporting the value of your business is that if its true value is significantly higher and this comes to light later down the line, the settlement with your former partner could be set aside, opening you up to financial claims.
There are three main things to take into consideration when valuing the business:
Assets - at least two years’ of accounts
Cash flow - typically forecasting to around 5 years in the future
Analysis of comparative business models - typically used if your business lacks assets or you cannot produce a sufficient cash flow forecast
Because of the risks involved, it is important to obtain independent financial advice when valuing the business. Depending on your individual situation, a simple ‘desktop valuation’ may be sufficient - usually if the company is small or you and your former partner trust each other. In other cases, it may be necessary to instruct a forensic account.