Through business valuation, owners can unearth facts and figures that can determine the true worth of a company. Check out this post to know more about this assessment process and why it is so integral to the growth of your business.
As a business owner, you strive hard to succeed and grow. From rising competition and potential threats to technological disruptions, you and your team stand up to every challenge with utmost resilience. But do you know the true financial worth of your company? Are your efforts actually delivering the results they should?
If you don’t have clear answers to these questions, maybe it’s time for you to look for a reliable business valuation service. In fact, it is recommended that businesses consider valuation services every year so that they are always fully aware of the true, current worth of their company.
What is a business valuation? How is it performed? Take a look-
1. What is Business Valuation?
In simple words, business valuation is a process of determining the true financial value of a company. Through business valuation, organisations can know the actual value or worth of a company as per its asset values, income values, and competition. Apart from business owners, the valuation is also critical for investors, sellers, buyers, and creditors.
As accurate valuation requires a combination of analysis, professional judgment, and experience, most businesses rely on valuation experts for the process.
2. What are the Top Benefits of Performing Business Valuation?
Some of the top benefits why businesses should consider valuation assessment every year are as follows-
- A better understanding of the assets of a company
- Broader knowledge of the resale value of the company
- Being prepared for unforeseen events and unsolicited offers
- Negotiating with buyers
- Efficient management of tax transactions
- Analysing business performance
- Protecting business value and improving performance
3. What are the Common Business Valuation Methods?
There are many different types of business valuation methods. Three of the most common ones are-
Asset-Based Method- It is a liquidation or going-concern approach where the business is valued as per the total investments.
Earning Value Method- The approach revolves around the belief that the true value of a business is in its potential to generate wealth in the future.
Market Value Method- In this method, the value of a company is compared to another company from the same industry that was recently sold.
4. How Long Does It Take to Value a Business?
If this is the first time that you are planning to get the business valuation done, you might also want to know about the time it will take to value your business. Reliable valuation requires careful analysis. Apart from this, the size of your company and the purpose of valuation also impact the duration.
Generally, it can take 1-2 weeks for a professional analyst to thoroughly value your business. Once the analyst has collected all the required information, it can take up to a month to receive the final valuation report.
5. How Do You Choose a Business Valuation Service?
The service provider or analyst you select for valuation will directly impact the quality of the assessment. So, it is obvious to choose the best after thoroughly comparing and analysing the available options, especially when it will be a long-term relationship. It is advised to value your business every year.
It is essential to focus on factors such as track record, speciality, confidentiality, market knowledge, valuation purpose, and your budget to make the final decision. You can consult a few advisory firms that offer business valuation services before making the final decision.
Knowing the True Value of Your Business with Professional Valuation Services
Business valuation is not necessary only when you are planning to sell or purchase a business. As can be seen above, there are several benefits of conducting business valuation regularly, irrespective of the buying/selling transactions.
If you’ve not valued your business for more than 12 months, look for a reputable advisory firm to get it done as soon as possible. Make valuation an annual affair to better understand your business, its growth, and value.