In the last twelve months have you had an assessment of your business’s value? If not, you should consider getting one. A business valuation provides multiple facts and figures regarding the value of a company by observing market data, asset values and the company’s cash flows.
Every business owner should have a business valuation performed that can be referred to. By obtaining a business valuation yearly, a business owner is not only able to measure growth but is also able to plan for future growth.
Here are 4 benefits of obtaining a business valuation.
1. Greater Knowledge of Company Assets
As a business owner, it is important to obtain an accurate assessment of the business assets. Estimates are not acceptable as estimates can be seen as a generalization.
By understanding a more proper financial figure, or a range of values to be gained from the valuation processes, business owners can know how much to reinvest into the company and how much to potentially sell their company for.
2. Broader Understanding of Company Resale Value
Often times, a business owner does not contemplate selling their company until an event occurs. As such, it is important to contemplate selling your company today even if the time frame is 2 to 10 years from now. By understanding the value today, you will have an opportunity to take more time to increase the company’s value to achieve a higher selling price.
Understanding what your company’s resale value is also enables you to negotiate a higher selling price. A valuation specialist will provide a list of comparable transactions to assist in solidifying your stance on the higher selling price.
3. More Accurate Company Value
Every business owner has an idea of what the business is worth through observance of market data. However, a business valuation from a reputable company will be able to accurately assess your company value. Although a business valuation may confirm what you observed from market data, a business valuation goes beyond that and provides additional information.
For instance, if you are looking to sell your business, a valuation assists in identifying the strengths and weaknesses of your business when compared to those operating in your industry. In addition, a business valuation report can point out areas of your business that you should focus on in order to make your business more sellable and profitable.
4. Higher Bargaining Power During Mergers/Acquisitions
If an interested party approached you about purchasing your company, you should be prepared to show them what the value is, what its asset withholdings are, how the company has grown, and how it can continue to grow. Take note that most interested parties will attempt to acquire your business for as little as possible.
With a business valuation, you know the value of your company and are able to negotiate the purchase price by showing a consistent trend in value growth provided through the business valuation annual exercise.
If you are offered less for your company than it is shown to be worth, reject the deal or offer to enter negotiation mediation. This can help both sides come to a comfortable agreement.
Understanding the value of your business is important, regardless of any near future transactions. Even if you have not thought about selling your business or purchasing a business, it is never too early to start planning. The first step in that process is a business valuation, which we are happy to provide you with. We can also help identify ways to increase the value of your business.