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Federated Insurance October "It's Your Life"

Posted: October 25, 2017

Don’t Take a Chance – Valuation Methods for Buy-Sell Agreements

A Buy/Sell Agreement helps a business owner “lock in” a value for the business. The Agreement does this by using a “valuation formula.” The formula you use could mean the difference between receiving liquidation value or fair market value. Does your valuation formula lock in fair market value?

Common Valuation Formulas for Buy/Sell Agreements

Option 1 – Book Value

The book value method (also known as net worth or owner’s equity) is simply the total assets minus the total liabilities as shown on your financial statement. This method is sometimes referred to as the “liquidation” method. This method usually understates the true fair market value of your business, as it does not account for goodwill, profitability, or recapture of accelerated depreciation.

Fair Market value of ABC Inc. = $1.4 million

Book Value = $450,000

Loss in value = $950,000

Option 2 – Agreed Value Method

With this method, owners periodically meet and set the value of the business in writing. This new value is then amended in the Buy/Sell Agreement. If you utilize this type, how long has it been since you documented a new value? If you have not adjusted the value to reflect today’s current value, you can lose.

Fair Marketing Value of ABC Inc. = $1.4 million

Last Documented Value (2003) = $800,000

Loss in Value = $600,000

Option 3 – Appraised Fair Market Value Method

This method has a stated process to formally or informally appraise the business. To arrive at fair market value, it factors in several things, such as the current value of assets, liabilities, goodwill, and profitability. This method ensures all interested parties receive the full value they deserve.

Appraised Fair Market Value of ABC Inc. = $1.4 million

Loss in Value = $0

Make sure your valuation method locks in the fair market value of your business. Take advantage of Federated’s Agreement EvaluatorSM to receive an informal review on the strengths and weaknesses of your valuation formula along with the other terms of your Buy/Sell Agreement.


This article is for general information and risk prevention prevention recommendations only and should be considered legal, coverage, financial, tax, or medical advice. The information may be subject to regulations and restrictions in your state. There is no guarantee following these recommendation will help reduce or eliminate losses. The information is accurate as of its publication date and ia subject to change. Qualified counsel should be sought regarding questions specific to your circumstance. Copyright © 2017 Federated Insurance, All rights reserved.


2018 AHR Expo in Chicago: Register Now, Free for a Limited Time!

Posted: October 23, 2017 

The World's Largest HVACR Marketplace - January 22-24, 2018

The AHR Expo brings the entire HVACR community together to see the latest products and technology, learn about the innovations and trends that are shaping the future of the industry, and build relationships face to face. 

Click Here for More Information and Registration

CONNECT 2017 Wrap-Up 

Posted: October 20, 2017

The Impact of Our Stories

Thanks to the attendees, exhibitors and sponsors who joined us for this year's CONNECT, where more than 860 attendees rolled up their sleeves to collaborate among the p-h-c industry's best and discover the value of sharing compelling information in Milwuakee...and beyond!

Click Here to Read More

Federated Insurance October Webinar

Posted: October 17, 2017

Where There's Smoke, There's Fire - Fire Prevention

It Will Never Happen to Me! This is a common thought and misconception of many businesses today as it pertains to their individual fire risk. Unfortunately, they don't realize until after the fact, that simple prevention strategies could prevent most fires that occur today. Fire Prevention will focus on steps a business should take, every day, to help prevent disastrous fire losses. We will discuss steps a business can take to ensure expedited recovery and the ability to resume servicing customers as quickly as possible. 

Panelist information: Amanda Dowling has 18+ years of property & casualty insurance experience and has earned the industry designations of CPCU, ITP, and AIC. Her career with Federated Insurance has included multiple positions in property & casualty claims, and learning & development trainer. Her current position is Learning & Development Manager - Claims at Federated's Home Office in Owatonna, Minnesota. 

What you will learn:
Analyze the main cause of fire across all industries 
Address these fire risks through consistent risk management 
Prepare for fire or other disasters to get your business back up and running to service your customers

Click Here to View the Webinar

Copyright © 2017 Federated Insurance, All rights reserved.


Federated Insurance October Risk Management Corner

Posted October 9, 2017 

Don’t Let Your Business Go Up In Smoke

Fires that hit businesses come in all sizes. They can occur anytime, anywhere, and from a variety of causes. They don’t discriminate. Spontaneous combustion, heating and electrical systems, smoking, poor housekeeping, the storage of flammables, and mechanical equipment failure continue to be the most frequent fire causes across all industries, and are often the result of missed opportunities to recognize and remove the hazard. But sometimes, hazards can be easy to miss:

  • A company employee was doing some cleaning with a mop and cleaning chemicals. Those two things in combination spontaneously combusted.

The point is, business owners need to be ready for almost anything. There’s no doubt that fires are devastating and have implications far beyond property damage.

Fires create chaos

Businesses are vital to a community’s well-being and survival. A fire at a business leaves the community wondering if the company will survive.

Fires create uncertainty

Employees are a business’s most valuable asset, and a fire can leave them with a lot of questions: Do I still have a job or do I need to move on? Will I get a paycheck—even for the short-term? What can I do to help? If the company shuts down, then what?

Fires create stress

Customers rely on businesses to be operational to fulfill their needs. When customers see a business destroyed, they can’t help but wonder how it will affect them. How will their needs be met? Today’s just-in-time business transactions may require customers to go elsewhere to get the products and services previously provided them by the damaged supplier. Will that be short- or long-term?

Fire prevention is an important enough topic to take the proper time and effort to put into action. It’s not just a “one and done” risk management activity; it should be done at least daily. Investigations reveal that most fires can be prevented if businesses consciously pay attention to a few, very specific hazards. Federated provides an industry- and business-specific, customizable fire risk evaluation checklist to use during facility inspections.

The sample checklists are intended to help employees, supervisors, or managers recognize potential fire hazards so they can fix the problem. However, checklists can do only so much. Employee training and proper fire prevention safeguards, procedures, and equipment may help prevent a fire from taking over control of your company.

Click Here for More Information on the Checklist and Employee Training

This article is intended to provide general information and recommendations regarding risk prevention only. There is no guarantee that following these guidelines will result in reduced losses or eliminate any risks. This information may be subject to regulations and restrictions in your state and should not be considered legal advice. Qualified counsel should be sought regarding questions specific to your circumstances and applicable state laws. Copyright © 2017 Federated Insurance. All rights reserved. 

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