Why Two Business Valuations Can Produce Different Results

One of the most frustrating situations in family law disputes is when two valuation reports produce very different figures for the same business.

This can create confusion and delay negotiations, particularly when each party relies on a different expert.

Understanding why valuations can differ helps explain how these situations arise.

Differences in Assumptions

Valuations often rely on assumptions about future performance, industry trends, and business risk.

If two valuers make different assumptions, the resulting valuation figures can vary significantly.

For example, one valuer may assume moderate growth while another may assume flat or declining earnings.

Differences in Valuation Methodology

Different valuation methods may produce different outcomes.

A valuation based on capitalised earnings may produce a different figure than one based on discounted cash flow or net asset value.

Professional judgement is required to determine which method is most appropriate.

Normalisation Adjustments

Valuers also make adjustments to financial statements to determine the maintainable earnings of the business.

These adjustments may include removing personal expenses, adjusting salaries, or excluding unusual transactions.

If different adjustments are made, the final valuation may change.

Why Independent Experts Are Often Used

To reduce disputes, family courts often appoint a single expert witness to prepare an independent valuation.

This approach ensures that both parties rely on the same valuation analysis.

Received Conflicting Business Valuations?

Conflicting valuations can create confusion and significantly delay family law settlements.

DB Forensic can review valuation reports, identify differences in assumptions, and provide a clear independent opinion.

Contact our forensic accounting team to discuss your situation.

Request an Independent Valuation Review