My husband is part owner of the company he works for, which is a C-Corp. All of his income is via a W2, he’s just paid a salary by the company. The company is an IT Services company where all employees work from home (there are only a handful of employees). There is no real estate, no equipment other than their personal laptops. When valuing the company for the CSS Profile I’m not sure how to do it. Cash assets minus debts? The only other thing that they have might be their reputation, but how does one value that? Since he simply earns a salary and it isn’t the same sort of thing as a small business where he’s getting paid from the profits directly, is this handled differently? I’m just not sure how to proceed. I’d appreciate any advice! Thanks!
Yes, I’d take a simple assets minus liabilities approach.
Obviously, there are accepted practices for valuing businesses and professionals who do that for other purposes. But for the purpose of college FA, guidance is pretty slim. I’ve had a few conversations with college FA folks over the years and the answer was pretty much: what would you get if you sold the business today?
Check if you also need to do the CSS business supplement for any of these schools. I seem to recall a section on there for listing assets and liabilities.
Many small businesses have certain assets that can’t be easily quantified by looking at a balance sheet, such as reputation (as mentioned by OP), customer base, etc.
Sure, of course. But I’ve asked FA offices about treatment of IP, brand equity, client list when considering valuation for FA purposes and the answer was always to just look at the easily quantified numbers in QB and tax returns.
Unless the OP has some other source of valuation that’s what I’d do. It’s what most of the business owners I know did, except those who had recent valuations done for other reasons.
Here’s a link to a current version of the CSS supplement. It’s been quite a few years but I was told by more than one FA office to take the business value directly from this supplement.