INTRODUCTION

Business valuations potentially play a variety of important roles in family businesses. Most
commonly, they are an important aspect of estate and gift tax planning in the context of
ownership succession planning. Buying or selling of businesses is another obvious area in
which valuations are important.
For businesses whose daily valuation cannot be looked up in stock market quotations,
valuations fulfill important functions. Employee stock ownership plans (ESOPs) require
annual valuations. Shareholder agreements can also require objective valuations. Shareholder
disputes, especially those involving litigation (including divorces), often require valuations.
Phantom stock programs are sometimes driven by formal valuations. Sometimes family
businesses maintain an internal market for shareholders with price determined by valuations.
As family business executives are increasingly held accountable for total returns to
shareholders, annual formal measurements of company value are increasingly utilized.
In some ways, valuation seems simple. A rule-of-thumb multiple can be applied to earnings,
sales, book value or some other statistic, and a ball park value can be calculated on the back
of an envelope. An entire small industry, however, has developed for those who seek a more
scientific and objective approach.
Valuation professionals often have professional accreditations attesting to experience and
specific knowledge. They gather specific information about the business being valued and
evaluate that information from a variety of perspectives. Then they compare that business to a
universe of similar enterprises with values known either through public trading of shares or
because of recent sales. Finally, an extensive report is produced, usually full of charts and
graphs, to show interested parties how conclusions about values were reached.
Several national firms, like Management Planning Associates, The Geneva Companies, or
Houlihan Lokey, specialize in business valuations, often in conjunction with mergers and
acquisitions practices. National accounting firms like Arthur Andersen, and even local
accounting firms, actively offer business valuations, as do major banking organizations.
An interesting new approach to business valuation is being offered on-line at
www.virtualadvisors.com. Rather than using labor-intensive interviews to gather necessary
information, the business owner inputs the data on-line using a comprehensive but user-
friendly questionnaire. In this way, all routine elements of the valuation process are
automated, while analysis and judgment are still performed by experienced professionals
using sophisticated techniques. A highly readable and relatively easily comprehended report
is produced in five business days at a cost of $2500 – a fraction of what most business
valuations cost.
While many family businesses resist professional valuation services, we frequently encourage
their use. Professional objectivity helps all parties to be on the same page. Tracking value
provides management with a meaningful strategic tool and the board with a vital
accountability measurement. And if a good valuation report is presented well, it can be an
exceptional educational tool at shareholders meetings.
Building financial value is only one of the ways in which family businesses can create value
– but it is important and important to measure. Used properly, financial value can be the
mechanism that supports all the other values that a family business might pursue.

NEED OF THE STUDY

The valuation helps in acquisition

The valuation helps in understanding the net worth of a family business

OBJECTIVES OF THE STUDY

To examine the theoretical contacts of family business
To examine the valuation methods of family business.

SCOPE OF THE STUDY

This study proposes to cover the existing models of valuation of family business
This study is exploratory, hence it’s board on secondary data ie. Is existing
literature
RESEARCH METHODOLOGY
The study is both descriptive and analytical in nature. It is a blend of primary data and
secondary data.The primary data has been collected personally by approaching the online
share traders who are engaged in share market. The data are collected with a carefully
prepared questionnaire. The secondary data has been collected from the books, journals and
websites which deal with online share trading.

Source of data
Primary Sources: The primary data was collected through structured unbiased questionnaire
and personal interviews of investors. For this purpose questionnaire included were both open
ended & close ended & multiple-choice questions.

Secondary method: The secondary data collection method includes:

 Websites
 Journals
 Text books
Method Used For Analysis of Study
The methodology used for this purpose is Survey and Questionnaire Method. It is a time
consuming and expensive method and requires more administrative planning and supervision.
It is also subjective to interviewer bias or distortion.
Sample Size: 100 respondents
Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and SPSS are used to analyze the data.
LIMITATIONS
The value of a family business has to take into consideration its particularities, which requires
professional judgment and common sense. A reasonable effort should be made to support the
fair market value used for a transaction because the tax authorities may take a close look at it.
This study is based on secondary data
This study covers only few popular valuation methods. Other methods
may not be covered.