Start with the change the family is considering
Succession can involve a share transfer, a sale, a change in leadership or several steps taken over time. Describe the proposed change before requesting a number. Identify the exact holding or business interest, the relevant date and who will use the analysis. A valuation for a family discussion may require a different engagement from work intended for tax, legal proceedings or third-party reliance.
Separate ownership from day-to-day roles
A family member may be a shareholder, director, employee and lender to the business at the same time. List those roles and the associated amounts separately. The value of the shares is a different question from a loan balance or the cost of replacing someone’s work. Bring the ownership documents and related agreements to the advisers so the instructions reflect the actual position.
Prepare one shared financial picture
Create a dated pack of accounts, management information and current balance-sheet schedules. Keep proposed adjustments separate from accepted figures. For example, if a family member’s salary is being discussed, document the duties performed and the resources the business would need if that person stepped back. A shared question log can help distinguish missing evidence from differences over the assumptions.
An illustrative succession scenario
Two siblings discuss one sibling’s exit while a parent continues managing key customers. A straight percentage of a whole-business estimate may leave unanswered questions about the share rights, the parent’s continuing role and any separate family loans. The useful next step is to record those questions and obtain the necessary legal and tax instructions. The example does not determine anyone’s entitlement or prescribe a discount.
Build a decision process the family can understand
Agree the purpose of the valuation, the information requested, access permissions and intended recipients. A scoped financial report should explain its approach and limitations. If the proposed arrangement involves tax, trust, estate or legal questions, identify the appropriate specialist advice before relying on a commercial analysis. Enquiries begin with a short outline; confidential records can be shared through an agreed process later.
Your starting checklist
- Proposed succession steps and intended recipients.
- Share register, articles, agreements and separate loan balances.
- Management roles, financial records and unresolved assumptions.
Questions before commissioning the work
Is a family succession valuation automatically suitable for tax?
No. A tax purpose needs a specific brief, appropriate basis and suitability review. Discuss it at the outset with the relevant advisers.
Does a share percentage determine the transfer price?
It supplies an arithmetic starting point, not a concluded valuation. The interest, rights, purpose and instructions need to be considered.
Further reading: ICAEW: defining a valuation assignment.
General preparation information. Illustrations are not client cases or valuation opinions. Any work is subject to an agreed scope and intended use.