Let’s face it. There is a world of things we would rather do with our businesses than general housekeeping. But, just like a good spring cleaning at home, periodically, and certainly every couple of years, there are just some things that you should do with your business. One of those items, if you have a partner, is to review your buy-sell agreement or other similar shareholder or member agreement to confirm that it addresses those contingencies which are generally contemplated, such as death, disability, withdrawal or termination of one of the partners from the enterprise. Valuations are funny. They can vary widely, and not just because of the perspective of the person doing the observation. (Your shares are worth a lot more than your partner’s shares even though you own the same number of shares?) That is why it is important to take a look at that buy-sell agreement or shareholder or member agreement with regard to the buy-out provisions, not only to confirm that you have something in place, but also from the perspective of valuation. Run the formula based upon the numbers which would apply and see if that is close to the value you believe the company is worth. If not, run it from a year ago, and then two years ago. See if the formula resulted in a valuation which was even close to what you believe the company was worth. Then you need to decide whether the formula is wrong and if your belief of the valuation is incorrect. And then you need to adjust.
Business Drudgery
