Importance of an independent business valuation

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If you’ve worked your business up from the ground, the chances are that you’ll know everything about it – in terms of profits and losses, numbers of staff, business practices and codes of conduct. However, if you were asked for the total value of your business, would you have an answer ready?

Consider the possibility that you may wish to sell your business in future. Perhaps you’ve been asked to partner in an exciting new venture, or you’ve set your heart on moving abroad? You may simply want to spend more time with your family. Whatever the reason, an accurate independent business valuation can make the process of selling a business far less stressful, and much more likely to succeed. Conversely, a business valuation could even change your mind about selling – so it’s an essential task if you’re considering a change.

The business valuation process is complex, based not just on your bottom line profits, but a multitude of figures and factors – both quantitative and intangible. For this reason it is recommended that you consult several accountants or business brokers before any negotiations or discussions, to ensure you have a comprehensive and objective figure for the value of your business.

In terms of quantifiable and measurable data, an accountant or business broker will compile a broad overview of your financial situation, including a history of any profits or losses, overall revenue, and cash flow. On top of this, the value of your existing stock and any owned properties, like warehouses or shops, will be taken into consideration. Finally, the value of any company vehicles, equipment and fittings can be calculated and taken into account.

Other factors, which are less measurable but just as significant during the business valuation, also help to provide an accurate picture of your company’s value. Financial figures provide an objective and useful insight into material value, but they are irrelevant when we consider a company’s reputation and their image. Therefore, business brokers will often analyse the general public’s reception towards a business when completing a valuation. Relationships with both customers and suppliers will be considered, as will the success of any competitors. During the business valuation, accountants or brokers may also consider the likelihood of potential threats or opportunities on the horizon, like changes in regulations or new government initiatives.

With so many factors affecting the value of a company, sometimes different brokers or accountants will produce highly varied figures during their business valuation. For this reason it can be useful to visit several, to eliminate any anomalies and provide you with a more in-depth insight into the potential value of your company. Knowledge really is power when it comes to selling a business, and with an accurate sense of the value of your business, you ensure that you won’t waste your time with unrealistically high expectations, or spend years regretting the decision to sell too low.

One thought on “Importance of an independent business valuation

  1. Hi Vexus,
    I find your article interesting, yeah i will agree with you that in terms of selling a business knowledge is the only power you have, you must be ensure that you wont be wasting your time and money. A great help thank you for posting !.

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