It\u2019s almost the end of February and we\u2019ve seen a big uptick in valuations that revolve around the intangible value of people both directly and indirectly.<\/p>\n
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We\u2019re asking you the big question \u2013 what do you think one person is worth?<\/p>\n
Well I guess there are a few routes to that answer…<\/p>\n
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.<\/p>\n
We\u2019ve 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.<\/p>\n
Because of this, we are increasingly considering key personnel risk for valuations. Professor Damodaran\u2019s\u00a0Difference Makers: Key Person(s) Valuation<\/em><\/a>\u00a0has helped us to develop our approach to this issue \u2013 it is an interesting read if you have the time.<\/p>\n 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!<\/p>\n Another issue is the relative worth of individuals as this can impact on what percentage of a share scheme that they are entitled to.<\/p>\n This is why we can be so helpful to your clients if they need a valuation related to an employee incentive scheme.<\/p>\n