It’s almost the end of February and we’ve seen a big uptick in valuations that revolve around the intangible value of people both directly and indirectly.
We’re asking you the big question – what do you think one person is worth?
Well I guess there are a few routes to that answer…
Is it how much you can charge? Or is it what it would cost your company to replace you? Or even, in the case of titans like Charlie Munger and Warren Buffet, what might it cost the industry to replace you? Few businesses can insure against employee retention, so they offer employee incentive schemes instead to tie people in. We all know that having ownership of a business makes you think about it differently.
We’ve had a recent rise in 409a valuations for retention and recruitment of US personnel in UK businesses. The reason we think this is relevant is because when an employee is being offered stock options, it indicates how important the employee is to the business.
Because of this, we are increasingly considering key personnel risk for valuations. Professor Damodaran’s Difference Makers: Key Person(s) Valuation has helped us to develop our approach to this issue – it is an interesting read if you have the time.
Obviously, unbiased and accurate numbers are important to both HMRC and the IRS. Working out what one person is worth can determine the value of a whole share class if the business needs to retain them!
Another issue is the relative worth of individuals as this can impact on what percentage of a share scheme that they are entitled to.
This is why we can be so helpful to your clients if they need a valuation related to an employee incentive scheme.
So if you want to know what you’re worth or have a client who needs to know what their employees are worth to their business, get in touch with us.
