America’s Best-selling CPE Programs Business Valuations

America’s Best-selling CPE Programs

 

Business Valuations: What Businesses Can Gain From Them

A business valuation measures the worth of a business on the open market. It analyzes the company’s management, capital structure, future earnings potential and market value of its assets – and can be critical to running a successful enterprise.

Business valuations are often performed during a sale, merger or divorce proceeding. But every business can benefit from an annual valuation. After all, a business is typically the owner’s largest asset – and understanding its true worth can lead to opportunities for greater success.

The Information a Valuation Will Return

Business valuations are full of information essential to running a successful business, including:

·         Details about the reason for the valuation.

·         A description of the company and its market position.

·         An analysis of risk factors specific to the business and industry.

·         An assessment of economic conditions and industry trends.

·         Detailed past and projected financial statements.

·         A review of valuation methods, and justification for those selected.

·         An estimate of value, typically based on a weighted average of the various valuation methods.

Using This Information to Your Advantage

A business valuation allows owners to make informed decisions when working on long-term or expansion planning, retirement planning or estate planning. Without one, you could be making plans based on an underestimated value, and foregoing tax-saving strategies. On the other hand, an inflated view of your business could result in wasting time and money on a business that’s not worth as much as you thought.

The economy affects the value of every business, based on prevailing market forces. Armed with up-to-date economic information, a business owner can make solid decisions, such as putting off buying equipment or hiring employees. Or, he or she may decide it’s time to borrow money to fund an expansion, or tighten up on expenses to save cash.

The valuation’s thorough review of industry trends can be used to gauge where a business stands, compared to its competition. For example, if your business is not performing to the same level as comparable companies, you may be compelled to find out why. Without this information, it could be years before you discover you’re behind your competitors – and too late to catch up.

Do You Really Know What Your Business is Worth?

Many business owners rely on internal financial statements to determine the company’s value. But a professional business appraiser will take a thorough approach – so you have a highly accurate picture of your business’s worth.

The appraiser will gather a great deal of information about the business, the industry in which it operates, current and projected economic conditions and other factors that affect value. In most situations, the various accepted valuation methods will yield different results. For example, the income approach bases value on expected income generation, while the asset approach bases value on business’s assets. The market approach bases value on past sales of shares in the business or a similar one. Each approach will supply a range of reasonable values, which are supported by valid means of justification. In any case, you’ll have a clear and accurate snapshot of how well your company is doing – or not. Without a professional business valuation, you could be at a serious disadvantage.

An Annual Valuation Can Keep You On Track for Growth

Business valuations should be included in every business owner’s plan

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The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.