A business appraisal or business valuation conveys the current economic value of a business by accounting for its team, assets, intellectual properties, earnings, growth, and cash flow analysis.
Why have a Profession Business Appraisal or Valuation?
Know the Economic Value of Your Business- Your Largest Asset
Regardless of the reason, every business owner should consider conducting a business valuation annually to accurately assess company growth. Appraisals provide valuable insights into a company’s value, including competition, assets, and income levels, through a valuation certificate.
Knowing the market value of your business gives you confidence to make decisions for your company. Here are the key benefits of conducting a valuation of your company’s worth.
1. Greater knowledge of business performance and growth
A business valuation helps business owners understand how well their business is doing in their industry. It relies on market value prices of comparable companies that have been sold or publicly traded.
An appraisal gives a more accurate value of your business using data like stock market value, assets, and bank account balances. Moreover, such information greatly reflects the company’s financial health and performance objectively. This is extremely helpful because you, as a business owner, can strategize your business decisions as your company expands further.
We will use up to six valuation approaches to assess your company’s worth using your financial and company data. We will also spend the time, so you understand the business valuation process and the value of your business. In addition, we do the heavy work to calculate the valuation of a company and provide you with the results.
2. Insight into company sale value
A business progresses through many stages as it goes through its own lifecycle. Some need capital, others require partners, and a few may be ready for sale. What most business owners do not realize, however, is that it is especially helpful to consider selling your company long before such a transaction even occurs. Understanding the valuation of your company today will help you properly set a higher selling price in the future.
Additionally, knowing your company’s sales value will also better equip you to negotiate higher selling prices. An appraisal expert will provide you with selling prices of comparable businesses in your region and industry, boosting your confidence in future sales. We will also do a deep dive into your cash flow and financial statements.
You can also read our article on obtaining a business valuation before you sell your company.
Your sale might be for estate planning and transfer to a trust. We can do a valuation to the Internal Revenue Service (IRS) standards with our knowledge of different valuation types to ensure a successful sale or transfer of assets using your company’s true worth.
3. A better understanding of company assets
All valuations involve conducting an in-depth analysis of company assets. Although most business owners have an estimate of assets in mind, such an approach is, at best, a generalization. Having an accurate financial figure for assets benefits business owners when reinvesting in the company. We can also value your intellectual property and see what percentage of the value of a business.
4. Resolve partner disputes
It is far from uncommon for disputes to arise between partners involved in a business setting. Such disputes often revolve around contract breaches, shareholder disagreements, and project delays, among other issues.
Whenever such issues arise, partners often turn to arbitrators or mediators to help resolve the conflict. During arbitrations, each party involved often presents a valuation that best supports their specific claim. To achieve a fair and accurate resolution, it’s beneficial to obtain an expert appraisal of the company by a valuation associate from BA FL|GA|HI.
5. Determines employee benefits and retention plans
Retaining talent and key employees is an important part of many business plans. Retention, however, involves properly compensating employees. It is important that compensation is proportional to a business’ value upon a sale or merger. This is why it is crucial that businesses accurately assess their company’s worth periodically.
Additionally, firms considering implementing an Employee Stock Ownership Plan (ESOP) should especially conduct an appraisal. This is needed for the shares’ initial value to be determined before such shares are sold to the plan.
6. Access to additional investors
Financing a company through additional investments is a great way to expand your business. Investors, however, will seek a complete and defensible business valuation report before making an investment. Additionally, potential partners will desire to better understand the ways in which their investments will contribute to your company’s growth.
Thus, undertaking an appraisal is especially important to your company’s potential growth. A company valuation shows your firm’s worth to investors and helps you predict how funding will increase your value. Your growth projections are critical as you expand your market capitalization.
7. Increased financing from banks
If you are interested in obtaining a loan for your business, then you will require a corporate business valuation. Many banks and financial institutions tend to conduct appraisals themselves before approving a loan. This is because valuations provide banks with insight into the true fair market value of the firm. Additionally, such analysis enables the bank to better understand the company’s additional financing sources.
Business Appraisal FL|GA|HI does many valuations directly for SBA banks and small business loans. For example, one of the valuation techniques we use is a discounted cash flow analysis to generate your business’s value.
Conclusion of Valuation of a Business
Businesses face a variety of scenarios that impact their growth, finances, and success. Regardless of how your particular business is faring, understanding its true value and worth can be extremely beneficial. Your business is so much more than its book value or its enterprise value.
Whatever the reason for you to require business valuation services, BA FL|GA|HI and our team of certified business appraisers are ready to discuss your situation, the valuation process, business valuation methods, and if our business appraisal services cost-effectively meet your needs as small business owners.