1. If the business valuator experiences an inappropriate attempt to influence the valuation, the counterpart will be notified of this. It will also be documented in the valuation report. It is not allowed to tell the business valuator what you think the business is worth, or do something else that the business valuator considers an attempt to influence.
2. Payment is required before the valuation starts. Therefore, it does not matter which of the business partners that purchases the valuation, as it prevents any leverage by the payment. However, you get to meet us in person before the payment is required.
Why anti corruption policies increase credibility
Down below are two fictive scenarios of how valuations without anti corruption policies can be manipulated towards a higher value, or a lower value.
John Doe´s Art LLC is the life work of John and he is very proud of it. He has an art studio in Manhattan, but his business is barely breaking even, due to his low volume and expensive rent. This is despite him not having taken a salary since moving the studio out of his home. An acquaintance of his, who is also very interested in art, has shown interest in buying into his business. This is exactly what John would need, not only for his business to survive, but also for his dream to continue.
He brings in a business valuator, but when the business valuators starts asking questions about his financials, he gets defensive, trying to deflect the conversation back to his amazing paintings and the prime location. Once the valuation is done, and gets sent to John, he claims that the business valuator didn’t appreciate the amount of work that he puts into his art, nor that the business valuator understood art. Therefore, he says that he is unhappy with the valuation, as it wasn’t the same number that he had wanted. He refuses to pay the invoice, until he gets the number that he believes that he deserves for his 25 years of experience of creating paintings. The business valuator complies only to get it over with, and get paid.
John Doe Furniture Manufacturing Inc is a family owned business since 1948. The 8000 sq ft manufacturing plant has several new pieces of machinery, and is located on the family property. Since it is a manufacturing company, it is asset intensive. When Jane Doe files for divorce, he tries his best to shop around for a valuation that is as low as possible. As John Doe shops around, he explains the situation and most business valuators he talks feel his emotional attachment to his family business. None of the business valuators want him to lose his business.
John Doe eventually chooses a business valuator, but when the valuation turns up “normal”, he disputes it, as he claims to disagree with the business valuator. He says that he is unwilling to pay the invoice until they reach an agreement. The business valuator eventually gets too emotionally involved with his client, and decides that he wants to save him from losing his business, while at the same point wanting to get paid himself. John Doe gets what he wants.
Want to go with a cheaper option or even do the valuation yourself? Nothing is stopping you, but...
You may lose the lawsuit, due to the valuation failing to be waterproof.
You may never settle the conflict, hurting the relationship with your counterpart.
You may get deceived while entering or exiting your partnership.
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