Valuation of startups and early-stage businesseshas become a more prevalent topic globally as investors and business owners have increasingly focused on the importance of the...Read More >>
Benefits of Performing Business Valuation Services
In general, businesses grow overtime and so should the value. But how do you measure that? Undergoing a business valuation process can help you answer that.
Business valuation services can be extremely important in certain contexts. Let us look at those contexts in some detail in this article.
Selling a business or shares:
When selling your business or company to a third party, you want to make sure you obtain what you consider a fair value or at least the market value. The asking value should be appealing to potential buyers but should not undervalue your business or the company.
Undergoing a proper business valuation process enables equity owners to know the value of their shares and ensures they are prepared to sell when the time comes. Business owners should verify that no money is left on the table and that the shares are valued fairly, just as you would when selling a property or an asset.
Buying a business:
Even though sellers and buyers often disagree on the value of a business or company, the ultimate value is determined by what purchasers are prepared to pay. A robust business or company valuation will look at the history of the relevant business or company, market circumstances, projected income, comparable companies or businesses, risk and opportunity factors to guarantee that the investment you are making is viable.
Business valuation services therefore become paramount before buying any business or company. It is a good idea to engage an experienced business valuer to provide you, an independent and objective view and a guide on the value, and hence the price you should pay.
When you need to negotiate with banks or other possible investors for capital, an objective valuation is often required. Professional assessment of your business or company’s value is recommended since it improves the lender’s/ funder’s confidence in you.
Planning your exit strategy:
When planning to sell a business, it is crucial to first establish a base value for the business or company and then develop a strategy to improve its profitability to boost its value as an exit strategy. The business exit strategy should begin far in advance of the exit, considering many possible scenarios and options.
During a court action, such as a personal injury lawsuit, divorce, or a dispute over the value of a business or shares, you may be required to submit proof of the relevant business or shares’ worth so that any damages awarded are based on the actual value of the business or shares rather than inflated figures assessed by a lawyer.
General Accounting and Finance Planning:
A depreciation plan may not reflect the actual worth of business assets, and if the balance sheet has not been adjusted for numerous conceivable modifications, it might throw up a value which is not at all commercial or practical.
In any event, the valuation based on balance sheet may undervalue, many a times significantly, the underlying business and any intangible assets (IAs) or intellectual properties (IPs) it may have created over the areas. Having a current business valuation will provide you with helpful information that will assist in making better business or corporate decisions.
A valuation is a procedure for determining a business or entity’s market worth. Business restructuring, shareholder conflicts, stock option schemes, mergers and acquisitions, and takeovers may all require business valuation.
Most experts consider valuations to be a critical component of sound decision-making in companies, both now and in the future. Even though it is difficult to anticipate what will happen in the future, companies must plan for uncertainties.
Business valuation services are a critical financial analysis tool that require the expertise of a valuation professional with the necessary experience, commercial acumen and credentials. When business owners choose low-cost valuations, they often overlook the substantial advantages of doing a robust and independent valuation with trained valuation professionals.
Business owners can not only negotiate a tactical sale of their company, but they could also devise an exit strategy, get funding, and lower their financial risk during a lawsuit by undertaking a business valuation services exercise.