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.