Understanding The Importance of a Business Valuation

Are you a business owner? Then you’ve come to the right place. Depending on your business requirements whether you are looking to invest or sell your business, knowing the true value can help determine your decisions when it comes to the future of your business as this can be your most valuable asset.

It’s important to know the ins and outs of your business and determining the value isn’t as simple as looking up a stock price. This is where a business valuation comes in, there are numerous reasons why you may need to value your business and why it’s important to choose the right team to get your started.

If you’re asking yourself, what is a business valuation? and why you may need one? This article has the answers for you, we will break down everything you need to know to get a clear understanding of how a business valuation is a great investment in your business journey.

What is a Business Valuation?

Valuation refers to the process of determining the current market value of a company. A number of techniques can be used in a business valuation to determine the true value. Most importantly the type of person needed to complete a valuation is a business valuer. A valuer is a certified professional that requires exceptional knowledge and expertise in the specialised field of business and property related purposes.

How is a Business Valued?

A business valuer will conduct a comprehensive report detailing the value of your business by weighing the nature of the business, financial performance, local and national economic conditions, and assets and liabilities. The valuer will also take into consideration any unique external factors that can influence the business operations of the existing ones or of the ones planning to start a new firm. External factors pertain to taking into account environmental regulations a company needs to bind to. To the relief of many organizations, companies like RSB Environmental cater to that particular need. All these will result in the true estimate of the value of the business.

As every business is unique, and each owner has specific requirements related to the business, there is no rule of thumb when it comes to the methods used that will result in a comprehensive and reliable value. The valuer will decide the most appropriate method depending on the purpose of the valuation.

Reasons for a Business Valuation?

No matter the type of business, getting a business valuation is important. There are numerous reasons why you might need to value your business, including:

  • Sale of your Business
  • Change of ownership
  • Opened to Investors/partnerships
  • You plan to sell part of your company stock
  • You require a bank loan to invest in a business
  • You require detailed information on your business’s growth
  • Tax purposes/ capital investment

The most common of the above-mentioned reasons you would require a business valuation is for investment or sales purposes. When you are interested in investing in a business and you feel the asking price is not correct, you would get a business valuation completed for pre-purchase purposes to give you insight into the true value of the business and its potential which in turn can save you thousands on your investment.

If you are a business owner and have decided “it’s time to sell my business phoenix (or elsewhere)”, a pre-sale business valuation will give you a clear understanding of the current state of business growth over the years and will determine the true value. Which you can use for the sale of your business, hopefully resulting in a profit of capital.

A business is only worth what the market demands, it’s all about timing and the need for your business within the market that is considered, no matter the valuation purpose. For investors and buyers, a business valuation is vital in proper decision-making, for both the present and the future of the company. Being prepared for uncertainty is key for the survival of any business. As we mentioned, a business valuation is a critical financial analysis that needs to be completed by a valuation expert.

We guarantee our team of experts are the best in the field for all your property/ business related requirements, our Valuers are highly qualified with over 20 years’ experience and API certified. We ensure that by choosing our team you will receive a comprehensive detailed report to help you negotiate the sale or purchase of your business, an exit strategy, financing abilities and reduce any financial risk that may occur.

Author bio

Jennifer Matthers – LinkedIn profile

Jennifer Matthers has been building her professional career as a property valuer for over 20 years, making her an expert in his field. After Jennifer finished her Bachelor’s in Property, she jumped straight into a training programme to develop her skills and further her knowledge on property. She now helps in creating new advanced training programmes for new valuers to pass on his expertise.