Most business valuations in the divorce context are performed upon long-standing businesses. Valuing an early-stage start-up company poses some challenges. In 2013 the AICPA released a guide detailing a framework for assessing the six typical stages of a business’ lifecycle.

Stage 1: The enterprise has no product revenue, limited expense history, incomplete management team, and initial product development.

Stage 2: The enterprise has no product revenue, substantial expense history related to product development, and an awareness for business challenges.

Stage 3: The enterprise has made significant progress in product development, key milestones have been met, and product development is near completion.

Stage 4: Initial sales have been made but the enterprise is still operating at a loss.

Stage 5: Product sales have grown and initial financial success has been attained with positive cash flows and profits.

Stage 6: The enterprise has an established financial history of profitable operations.

Most business valuations are performed on a mature company well into Stage 6. But when valuing an early stage company, there will not be historical data to consider. Some indicators of value apart from traditional financial data includes: the company’s business plan, correspondence with investors, financial forecasts, management’s history of success in other companies, market studies and surveys, interviews with management,  expected pricing model, and what are the unknown factors that will affect value. Additionally, understanding the non-traditional methods of compensation that could affect a particular owner or investor’s value is important. For example, in some industries, it is common to offer stock options to investors in early stages which can dilute the ownership of current stockholders in the future.

Having a financial expert skilled and knowledgeable in valuing early-stage entities is important to presenting the client’s best position in the divorce case. An unfamiliar expert may over or under value such an entity and cause a problem for the client in the division of property.

Hat tip to David Witherspoon’s article Valuing an Early Stage Company in Marital Dissolution from Family Lawyer Magazine.

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Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.