The importance of getting an accurate valuation for your business and the tool available to help you
Current United Kingdom’s economy provides the best opportunity for business owners to sell their businesses. All businesses must be valued before being placed on sale. The process helps a business owner to determine exactly how much his or her business is worth. As a potential seller, you should know the importance of getting an accurate valuation for your business and the tool available to help you. Valuating a business is a complex process and must be approached carefully. Below are top tips on how to value a company.
The first step on how to value a business when it comes to the importance of getting an accurate valuation for your business and the tool available to help you is preparation of business information. The information should cover all aspects of the business including finances, assets, legal information, business profile, business plans, staff, customers, and suppliers. The information should be detailed and accurate. Preparing business information will not only help you with the valuation, it also proves to potential buyers that you are a serious business person.
After you have collected all the information you need, decide on which of the many business valuation methods you will use. The basic business valuation method when it comes to the importance of getting an accurate valuation for your business and the tool available to help you, is the market value method. Return on investment (ROI) method can also be used to arrive at the value of a business. To arrive at a selling price, the annual profit of the company (before owner’s salary) is divided by the ROI.
The third method in regard to the importance of getting an accurate valuation for your business and the tool available to help you is by using its assets. All assets owned by the business from physical assets to intangible assets should be considered. Brand recognition, customer loyalty, customer list, and the business’ reputation are some of the common intangible assets. For physical assets, depreciation should be taken into account. Where the business includes land, the appreciation of the land value should be included.
A business owner can use the cost of starting the business from scratch to arrive at its value. This is one of the tenets in the importance of getting an accurate valuation for your business and the tool available to help you Documentation of receipts is needed to make this method successful. The costs involved in starting a business includes money spent on stocks, permits, licenses, developing products, buying or leasing premises, and purchasing tools and equipment. Labor costs involved should also be factored in. Future profit of the business can also be used to determine its value. Any buyer is interested in the future profit so you should also benefit from it when you are selling.
You can also value your business using investment value method. Investment value of a company is the value of a business depending on the expectations of the owner. This value can be equal or different from the market value. Valuation tools can be used to give fair investment and market values. A business owner can also use professional company valuation services to establish the business’ market value.
The above tips will help all business owners to accurately answer the ‘how much is my business worth?’ question. For improved accuracy, it is always advisable to consult with experts, like Company Valuation Services. Valuations by different parties also improve the accuracy of the final figure.