Owning a small business is typically one of the more effective ways to turn the American dream into reality. Very few entrepreneurs are able to run a successful venture without some support, though. Indeed, it is not uncommon for their spouses to put in capital or hands-on effort.
If you are going through a divorce, there is a good chance your soon-to-be ex-spouse has an ownership interest in your company. Consequently, during your divorce, you and your husband or wife are going to have to address the future of the venture. Coming up with a realistic estimate of your business’s value is the first step.
Many valuation methods
According to Fundera, there are seven possible business valuation methods from which you can choose. Market-based valuation, though, is likely to be one of your quicker and more cost-effective options.
A market-based approach considers how much your business is apt to bring on the open market. Rather than taking a deep dive into your books, you simply look for recent sales figures for comparable businesses.
Some potential problems
While a market-based approach might seem like the way to go, there are some potential problems with the valuation method. For example, you might not be able to find enough useful sales data, especially if your venture operates in a remote area or has a unique business model.
Moreover, market-based valuation often does not account for special circumstances, such as outstanding debt, expensive equipment or intellectual property. Ultimately, to ensure you receive the valuation that most benefits you, you might want to use more than one valuation method.