Understanding the factors that determine the value of any business will pay tangible dividends by focusing you on ways to increase your firm’s short and long-run profitability. Moreover, if you choose to sell your business at some point in the future, this knowledge will assist you in positioning your company to receive the highest price. Therefore, there is no time like the present to begin to understand what a business valuation is, under what circumstances a valuation is customarily completed, and the critical issues to watch out for when events dictate that you undertake a business valuation.
Whether you are selling or buying a small business, determining a fair market value of the target business is generally considered one of the essential ingredients in the business transfer process.
Determining a supportable asking price is crucial when listing a business for sale in the marketplace. It never makes sense to put a business on the market that is severely overpriced. Industry statistics indicate that the #1 reason why some small businesses don’t sell is because they are overpriced. A business valuation performed by a qualified valuation professional or Business Broker can be instrumental in determining a realistic asking price that will eventually result in a sale.
Having access to a professional business valuation can help support their offer to purchase, and may also be valuable in obtaining bank financing for the acquisition. Many small business lenders and banks will require a business valuation be performed on the target business before approving acquisition financing is approved.
Often certain legal issues such as divorce, estate issues, and business partner disputes may require that a business valuation be performed to cure the issue.
A business valuation performed by a valuation professional can also be instrumental in helping a buyer secure business acquisition financing. A business valuation can also be very helpful to small business owners when trying to raise capital or secure credit for expansion.
The range of needs for valuing businesses continues to widen, and Xcel Accounting can provide in-depth analysis to help you identify and analyze the factors that drive the value of your company or one in which you have an interest.