• Do the owners bring unique knowledge and skills essential to the company's future?
• What level of compensation would be needed to replace them?
• Does the business rent equipment or facilities from affiliated companies?
• Are there retired stockholders receiving dividends?
• What fringe benefits do the owners receive?
• Are there any long term contracts or obligations not reflected on the balance sheet or income statement?

           In addition, the appraiser will want to know if tax-motivated depreciation of equipment reflects the actual future cost of replacing it.
    Next, your appraiser will remove nonoperational income, such as investments, nonrecurring expenses resulting from disasters, settling a law suit, discontinued operations, altered accounting
                                --see page 2

    In fact, your income statement and balance sheet aren't much help in determining the worth of your business. Those documents are a snapshot of the business today. The true value of any business is measured by the benefits it will produce tomorrow.

Who Needs a Business Valuation? You do if you want to:

Plan for continued growth Apply for bank loans Determine estate tax liabilities Draw up buy-sell agreements with partners, stockholders Settle litigation Liquidate the business Determine replacement value Ascertain proper insurance coverage

    What's more, annual financial statements include nonrecurring expenses and revenue sources that really should be eliminated from consideration or "normalized." For example, owners' compensation may not reflect the market value of the services they provide the company, thus creating a distorted picture of the company's performance. In addition, outside investments and other activities listed in financial statements should be eliminated if they are un-related to the nature of the business.
    A professional business apraiser addressess these issues by preparing what's called a normalized earnings statement.

How Things Really Look Today . . .
There is no set formula for estimating the value of a business. Indeed, there are a number of factors usually considered, not the least of which is the state of the market and your company's position in it.
    From a computational standpoint,