[Graphic of a book on the left and three gold coins, a pen, and a hand with a wristwatch on it pointing to a $100 bill]

BOOK VALUE IS NOT FAIR MARKET VALUE

Many business owner fail to consult with independent valuation firms to determine the fair market value of their business, relying instead on book value. Though it can be costly, a proper valuation can end up saving business owners millions of dollars!

[Graphic of a book] What is book value? Vs. What is fair market value? [Graphic of a calculator]

Book value: Total assets minus total business liabilities equals book value

Fair market value: Price a willing buyer and seller would transact at, often very different from book value

[Graphic that says Key Considerations with a gold key on the left side and the right side]

[Graphic of two hands embraced in a handshake inside a blue circle]

Book value may not account for customer relationships or future business value and growth.

[Graphic of a line chart trending upward inside a yellow circle]

Fair market value is dependent on variables like the economy, if the owner feels pressured to sell, and how quickly a qualified buyer can be identified.

[Graphic of a clipboard inside a blue circle]

An inaccurate business valuation can result in:

-Underpaying the seller

-Not having enough money to live off during retirement or disability

-Not leaving enough money to a business owner’s family upon death

[Graphic of a magnifying glass inside a yellow circle]

Business valuation is not an exact science. Having a skilled appraiser is critical.

[Graphic of a laptop with a dollar sign on the screen inside a blue circle]

Having an idea of what your business is worth is not the same as knowing its fair market value.

[Graphic of a pie chart with one-third faded out inside a yellow circle]

If an owner’s estate is appraised at book value, not fair market value, the IRS may challenge and increase the valuation for estate tax purposes.

[Graphic of a clock showing approximately 5:03 since a blue circle]

Business owner valuation disagreements may result in a legal dispute when an owner wants to or is forced to opt out.

POTENTIAL OUTCOMES OF APPRAISAL

[Graphic of scale with a book saying book value on the left and a stack of dollar bills representing market value on the right, with book value being lower and market value being higher]

BOOK VALUE GREATER THAN MARKET VALUE:

The assets on the books are worth more than future profits and cash flows

[Graphic of scale with a book saying book value on the left and a stack of dollar bills representing market value on the right, with book value being higher and market value being lower]

MARKET VALUE GREATER THAN BOOK VALUE:

Consistently profitable companies typically have market values greater than book values.

WHAT ARE SOME WELL-KNOWN VLAUATION METHODS?

[Graphic of a book saying book value] BOOK VALUE

[Graphic of a calculator] CAPITALIZATION OF EARNINGS

[Graphic of a dollar bill being cut in half by a pair a scissors] DISCOUNTED CASH FLOW

[Graphic of an office building with trees in front of it] COMPARABLE COMPANY SALES

Speak with your financial representative who can help you fight the right resources for you and your business.

Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

The Guardian Network® is a network of preferred providers authorized to offer products of The Guardian Life Insurance Company of American (Guardian), New York, NY and its subsidiaries.

Brought to you by The Guardian Network © 2022 Guardian Life Insurance Company of American ® New York, NY.

2022-145434 (Exp. 10/24)