Business Valuation Information Request Overview

We understand that gathering information for a business valuation can feel like a daunting task, but our process is designed to be as straightforward as possible. Typically, we can begin and make significant progress with just a few key documents: the past five years of financial statements or tax returns, any relevant ownership agreements, and available projections or budgets. If additional details are needed, we’ll guide you through it step by step. Our goal is to keep things efficient, minimizing any disruption to your daily business operations while ensuring a thorough and accurate valuation.

Below we provide a comprehensive overview of the types of information we analyze during the valuation process. This is meant to illustrate the depth of our work, but rest assured, we will work with you to make the process as simple, painless, and minimally invasive as possible.

Comprehensive Valuation Information Request Checklist

A. Financial and Tax Documentation

• Annual Financial Statements:

  • We request complete financial statements (preferably on an accrual basis) for the past five years, including:

    • Balance Sheets

    • Income Statements

    • Statements of Cash Flows

    • Supporting schedules and notes

  • Audited, reviewed, or compiled statements prepared by a CPA are especially valuable, as they provide greater assurance of accuracy.

• Tax Returns:

  • Federal tax returns for the past five years are critical for understanding the company’s historical financial performance and tax position.

• Interim and Year-to-Date Financial Statements:

  • Interim financials provide a real-time view of the company’s current financial health, while comparable figures from prior periods help identify trends.

• Accounts Receivable and Payable Aging Reports:

  • Detailed aging schedules help assess the quality of the company’s receivables and its obligations to suppliers.

• Depreciation and Amortization Schedules:

  • These schedules are necessary for understanding the company’s investment in fixed assets and the associated tax implications.

    
    

B. Revenue and Expense Analysis

• Revenue by Customer:

  • A breakdown of revenue by customer, particularly the top ten customers, helps us evaluate customer concentration risk and revenue stability.

• Purchases by Supplier:

  • Understanding the company’s reliance on key suppliers is vital for assessing supply chain risk.

• Operating Expenses:

  • A detailed breakdown of operating expenses allows us to identify cost-saving opportunities and evaluate the company’s operational efficiency.

• Budgets and Forecasts:

  • Budgets and forecasts help us understand management’s expectations for future performance and assess the company’s growth potential.

    
    

C. Compensation and Key Agreements

• Compensation Information:

  • We analyze compensation data for owners, executives, and key employees to ensure that it aligns with industry benchmarks and reflects fair market value.

• Material Agreements:

  • Reviewing key contracts helps us understand the company’s obligations and relationships with stakeholders. These include:

    • Employment contracts

    • Lease agreements

    • Supplier and distributor agreements

    • Customer contracts

    • Non-compete and confidentiality agreements

• Corporate Governance Documents:

  • Corporate governance documents provide insight into the company’s ownership structure and decision-making processes. We typically request:

    • Articles of Incorporation (or Organization for LLCs)

    • Bylaws and amendments

    • Operating Agreements

    • Corporate minutes from board and shareholder meetings for the past three to five years

      
      

D. Legal and Contingent Liabilities

• Litigation History:

  • Understanding the company’s litigation history helps us assess potential legal risks that could impact its valuation.

• Contingent Liabilities:

  • Contingent liabilities, such as pending lawsuits or regulatory issues, can significantly affect the company’s future cash flows and must be factored into the valuation.

• Related Party Transactions:

  • We examine related party transactions to ensure they are conducted at arm’s length and do not distort the company’s financial performance.

E. Asset Information

• Fixed Assets:

  1. A detailed fixed asset schedule helps us assess the company’s capital investments and understand its capacity for future growth.

• Real Estate Holdings:

  • Real estate holdings are often significant assets that can materially affect the company’s value. We request information on:

    • Location

    • Purchase price and date

    • Current appraised value

    • Property tax assessments

• Intellectual Property:

  • Patents, trademarks, copyrights, and trade secrets can be key value drivers, especially in technology-driven or creative industries.

• Non-Operating Assets:

  • Identifying non-operating assets ensures that they are properly accounted for in the valuation, as they may represent significant hidden value.

F. Additional Considerations

• Unusual or Non-Recurring Items:

  • We consider unusual or non-recurring income or expenses to ensure that the valuation reflects the company’s normalized earnings.

• Key Personnel Information:

  • Understanding the roles and responsibilities of key personnel helps us evaluate the company’s management strength and succession planning.

• Historical Industry Data:

  • Industry reports and benchmarking data provide context for the company’s performance relative to its peers.

• Pending Acquisitions or Divestitures:

  • Pending transactions can significantly impact the company’s value and must be thoroughly analyzed.

At Arbiter Valuation, our approach to business valuation is rooted in meticulous data collection and analysis. By tailoring the information request to best serve the unique needs of each client, we ensure that our valuations are comprehensive, accurate, and actionable.

This checklist represents the depth of our commitment to delivering value through expert insights and rigorous methodology.

If you’re ready to begin the valuation process or need a trusted partner to guide you, contact Arbiter Valuation. Our seasoned professionals are dedicated to providing the highest level of service and expertise.