Collaborative Divorce

In traditional divorces, each spouse engages a lawyer who fights hard to “win.” Their weapons can include bringing in their own financial professional to value financial assets. Naturally the neutrality of those valuations may be suspect in the other party’s eyes, even if the valuator follows all proper procedures. In collaborative divorce, each spouse still hires a lawyer, but the goal is to reach a settlement that satisfies each party. Neutral consultants, such as financial and mental health professionals, are also frequently involved. The model is “troubleshoot and problem-solve” rather than “fight and win.”

While collaborative divorce is not for everyone, in the right settings it can have the following advantages:

• Quicker Resolution
• Lower Expenses
• Less Acrimony
• More Control
• More Privacy

Divorces litigated through the Odessa court system can often take a year or more to reach a conclusion. An Odessa business valuation using the collaborative process can move faster because there is no waiting for motions to be filed and hearings to be held. Odessa attorneys likely will have fewer billable hours since there is less engagement with the courts, which result in less fees paid by business owners. There is only one Odessa business valuation consultant rather than two. In addition, because litigated cases tend to take more time, there may be a need for revised business valuations as economic conditions change while the divorce makes its way through the process.

The collaborative divorce is not for everyone. However, many divorcing spouses in Odessa have found that a collaborative process can reduce tensions and cost and provide a result satisfactory to both parties. Attorneys can benefit from numerous services provided by an Odessa business valuation professionals in litigated and collaborative divorce matters. At Caprock Business Consulting, our professionals are trained in the Collaborative Practice and provide assistance to Odessa attorneys in collaborative and litigated divorce matters. 

Due Diligence

Some of the most common expensive mistakes Odessa business owners make are valuing the company themselves. Often, Caprock Business Consulting is brought in to assist a bank with financing an acquisition of an Odessa business by providing a business valuation. We have seen time and time again where the price established was based on a sellers intuition. More often than not, we see the company selling at a bargain price due to lack of understanding risk, growth, and earnings related to the Odessa based business. 

Risk is the measurable possibility of something happening or not happening. For businesses, risk can be measured in numerous ways including benchmarking against similar Odessa businesses (“guideline companies”) or using a more theoretical approach such as a buildup method from market observation. None of this can be done, reasonably and supportably, without understanding the key economic drivers of the Odessa marketplace. This prerequisite entails understanding the historical and current operations, the industry and competitive environment, operating assets, liabilities (booked and/or contingent), stakeholders, growth factors and the earnings profile of the business going forward. After understanding the drivers of risk for the subject business, the same drivers may be ascertained for the guideline businesses so that a supportable comparison can be made, ideally. With an appropriate understanding of the risk factors, and its comparison to similar businesses, the resulting business valuation begins to form. 

Business growth is primarily discussed in the context of revenues, profits, cash flows and assets. For some companies it also can include number of locations, products, contracts, square feet, customers and employees. In addition, growth on a larger, macro scale must also be considered as it applies to economies, industries, markets and populations. These areas are an example of the growth factors which can significantly impact a business valuation and careful attention must be made to fully understand these factors in context. When we investigate the nature and history of the Odessa business, we find a relative context for future growth. Many times management and business owners make decisions to enhance shareholder value, which may include attaining the highest valuation possible. These decisions are most transparent in forecasts and projections. Risk is inter-related to future growth expectations. In short, considering growth in the context of risk is critical during a business appraisal. 

Earnings are naturally a key component to analyze and arguably the most important factor. Odessa business owners fail to identify the earnings available to the buyer and only analyze the earnings as they exist as of the business valuation date. Earnings, in this context, is a broad term to discuss operating performance of a business and is inclusive of such terms as EBITDA, net income, dividends, distributions and cash flow, to name a few. Earnings are the primary financial benefit of owning an Odessa business and are indications of performance. Careful consideration of these metrics, including industry specific earnings metrics, is very important. Changes in theses metrics over time can provide clarity on operational problems and successes. In addition, business valuation experts may also consider the earnings of other guideline businesses in the industry. Benchmarking may provide conclusive support regarding industry specific issues in the business but also macro issues across the economy. Earnings have significant impact on businesses strategy, future investment and capital decisions. Without investigating the earnings of a business, an Odessa business valuation expert cannot make an informed opinion on the value of a business.

Often times the first thing an Odessa business owner does after he gets an offer from someone to buy their business is call us to obtain a business valuation. Odessa Business owners usually tell us that they have an idea what the business is worth or even what they would take for it, but want a professional business appraiser to “verify” their assumptions.

One of the things many Odessa Business owners do not realize about the business valuation process is that adjustments are made to historical financials. These adjustments provide both the buyer and seller with better insight into the company’s true earnings. An Odessa business valuation reviews trends in the financial statement and analyzes material fluctuations. An Odessa business valuation also includes an interview and site visit, which can add value the seller didn’t think of previously. These are just two examples of common mistakes business owners don’t consider when determining if they need an Odessa business valuation. 

An Odessa business valuation expert must go through a proper due diligence process to understand of the impact of the cost, income, and market approach to truly understand the enterprise value of a company. Merely assuming a publicly traded minority value as a reasonable basis to calculate enterprise value can lead to a significant error in due diligence and negatively impacts the credibility of an enterprise value opinion.