What are the Benefits?
A professional business valuation is a good idea whatever stage of business you are in, in other words not only when you are thinking of or about to sell. Getting your business professionally valued every 12 months will help you keep accurate records regarding the actual worth or value of your company. This information can be crucial when you do decide to sell and are asking for top dollar – you’ll have the facts and figures to back you up.
Before you embark on getting a business valuation assessment, remember that accuracy is important. You cannot estimate this or that because the end result will be based on guesswork rather than actual figures. So, ensure that your accounting practices are on point as specific numbers need to be gained from valuation processes. This will then assist in obtaining the proper insurance coverage, knowing what you need to reinvest in the company and how much you need to sell your company for (if you decide to) in order to still make a decent profit that you will be satisfied with.
If you have decided to sell you business, a professional valuation is worth its weight in gold. And if you want to get more bang for your buck from a business valuation, have one done every year for a few years prior to selling. A yearly business valuation will assist in displaying company growth and worth in terms of market competition and asset and income values.
Of course it may not always be possible to plan to sell in 2, 3 or 4 years time. Sometimes a sale may be necessary in a short period of time and a valuation in those circumstances will certainly also always be very useful, if not crucial to have.
However, if you have the luxury of knowing that you will sell in a few years time, a yearly business valuation allows you to monitor value yearly and see what steps you need to take to increase your company’s value before the next valuation is performed. Not only will this help to show company income and valuation growth over the previous years, it will also show potential buyers that the business has enjoyed regular, consistent growth thus supporting you in asking for a higher selling price.
Further to this, if you are able to demonstrate, through up-to-date and accurate financial statements, that your business is likely to be profitable in the future, you can demand a higher sell price for your business. This helps to give a prospective buyer an idea of the future profits that they may expect from your business in the future.
To estimate the future profit of your business, start by examining any trends in your business finances from recent years. A professional business valuation can also include trends of similar businesses in your industry to see how your business compares and how the market is travelling as a whole. You can then use this information during negotiations of the final sale price of your business.
There are other circumstances where a business valuation can also be beneficial, outside of when an owner decides to sell. These include;
· Dissolving a business relationship
If one or more partners in a business wants to leave, a professional business valuation can accurately identify each person’s monetary worth in the business, thus providing a fair value for that person or persons to be bought out.
· Making business decisions
When performing a business valuation, a valuer will take current market conditions into account. That being said, a business owner can then use a valuation as a decision-making tool. For instance, it can help to identify the ideal time to market their business and if that is not the present time, they can hold off on selling until the market changes.
· Manage the Management Team
A regular (yearly) business valuation is good business practice as it will help you as the owner to assess the performance of your Management Team. You will be able to see what facets of the business are performing well and if anything needs to be changed or modified. A valuation will help you focus your energy where the business needs it most.
As a business owner, you will have a general idea of what your business is worth, based upon simple data such as stock market value, total asset value and company bank account balances. A professional business valuation that reflects true company value is much more than these simple factors. It is a good idea to work with a reputable valuer to ensure the correct numbers are used and the right methods are applied. You will then be well-placed to not only run your business efficiently and profitability, but also to show the real value of your business to future potential buyers and investors.