Business owners would do well to assess their business value on a yearly basis on three fronts: market competition, asset values, and income values. The business valuation services conducted by a professional expert will provide an assessment backed with facts and figures to arrive at the actual worth or value of the company. A business valuation is something that owners must have available at all times, and a yearly assessment would depict the company’s growth over the years.
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But why do you need to know the value of your business as it stands today if you have no intention of selling any time soon? The answer is simple but often underplayed.
Why Your Business Needs Valuation Services in 2022
1. Get a better understanding of your business’ assets
When your business goes under a business valuation, it is easier to see the state of your assets. While you might not go deep diving every day of the week, a business valuation requires a closer look into what is going on with your business.
Knowing what your business assets are and how they are performing or holding up will help you get an idea of what is going on. Having a clear picture of your business’ assets is important when you make decisions. If you don’t know where you are currently, you don’t know where you are going. Your company will also find these numbers helpful whenever you want to get proper insurance coverage or understand how they should reinvest into the company.
2. Reveal weaknesses
Having business valuation services done will reveal weaknesses that may be in place with your business. Whether you are putting your business up for sale or not, it is important to look at any weaknesses your business has. When you know where there are weak areas in your business, you can work on it.
Business valuations look at a company closely to see how it performs and where the risks are. The valuation looks at all parts of the business that drive value. A business valuation can also reveal future problem potentials.
3. Prepare for the worst
Many dark and scary times can hit a business from a partner’s death, a divorce or a failing economy. While no one wants to think any of these bad things are going to happen, it is important to be prepared, and business valuation services are going to help with this.
A business valuation can also help your family if you pass away. You want them to know how much the business is worth truly, so they don’t sell the business for less than what they deserve.
When you prepare for the worst ahead of time, you can avoid legal mediations or lawsuits trying to figure out how much your business is worth. If you have to go through this process under the stress of a lawsuit, it is a much different experience.
4. Pre-Sale Planning
The lesson here is simple: buyers will only pay a high price for an attractive business. A professional business valuation is instrumental in identifying changes that need to happen to make a business more attractive to buyers.
5. Benchmarking Growth
Shareholder agreements often contain provisions requiring regular valuations: this information helps owners and management keep up with the business’s changing value. This helps you assess how your business changes over time, and weigh how effectively various ownership strategies are functioning.
If you prefer to minimize costs and time, a valuation firm can annually calculate the value based on predetermined procedures. This can be as simple as determining the current EBITDA multiple, then applying it to your business’s most recent EBIDTA stream. This helps owners see how the company is performing in light of market trends but is a limited analysis, not a full appraisal.
6. Access to More Investors
A business valuation assumes importance when you are seeking more funding from investors to fuel your company’s growth or save it from financial disaster. Based on your business valuation you can provide interested investors with a valuation projection.
7. Business Valuation Will Help During Mergers & Acquisitions
If a major company wants to acquire your business, they want to have solid facts and figures in front of them. While you want to get the most money possible and they want to pay as little as possible, you need a true value for your company. Failing to get a business valuation could leave your own to low offers.
Business valuations and sales should go hand in hand. Never try to merge or sell your business without knowing the cold hard facts. You can show them how your business has performed and will perform. Your goal is to paint your business’ picture as positively as possible. Business valuations can be a pen that draws the perfect picture if your business is healthy.
8. Trust/Estate Planning
Your business worth determines what kind of tax planning you need to do for your estate. Does your the value of your assets and business exceed the federal estate tax exemption total?Business valuation services now makes it easier for tax time and can maximize what your heirs receive after taxes.
When To Consider Having a Business Valuation Done
Here are some of the reasons you might consider having a business valuation:
- Change in ownership as part of succession planning or retirement
- Gifting shares of a business to children as part of a succession plan
- Merger or sale to another entity
- New shareholder or partner coming on board
- Raising investment capital
- Establishment or annual update of an employee stock ownership plan (ESOP)
- Going through a divorce
- Estate tax purposes
The Bottom Line
Once your business’s valuation has been established, establish new goals to raise up the company’s value over the next year. Set time aside every year to compare the previous years’ valuations to measure growth, losses, and notice where room for improvement is. There are different methods and mathematical formulas used in conducting a business valuation.
Quality business valuation experts understand each of these approaches and formulas, and can therefore efficiently determine which will yield the type of results the management is looking for. Apart from knowledge and experience, quality business valuation experts will take the entire valuation process with serious intent to deliver results.
Limitless Investment and Capital’s Business Valuation Services
As a business owner, you will know that there are all kinds of factors, including the expected performance of the economy, that come in to play but key in any business is knowledge. Having an in-depth, objective view of your business, including its value, is simply essential. Call us today to schedule a FREE consultation regarding business valuations services.