When you're looking at the possibility of selling your business, figuring out the valuation of a company is an important step in ensuring you can negotiate from a point of strength. Business valuation firms can help you through the process of business appraisal so that you can get on with the process of selling your business. A company valuation expert provides a valuable service when you're trying to wrap things up.
Factors Involved in Company Valuation
Beyond a simple look at the balance sheet and what capital you have in your company, business valuation firms look at a number of different factors that affect the actual worth of your company. They consider how long your company has been in operation, how many people you have working in your operation, how many and what type of customers, how tightly the customers are tied to the current owner and the condition and quantity of your inventory, equipment, buildings and supplies. All these factors will tie in to how successful the business may be for a new owner and are a vital part of business appraisals.
Approaches to Business Appraisal
Most business valuations take one of three approaches to determining the value of your company, depending on which one will provide the most accurate value.
- An asset-based approach looks at the value of the assets. It's commonly used when the value of a business' assets is higher than the expected income.
- A market-based approach looks at what similar companies have sold for in the past and bases the value on those figures.
- An income-based approach looks at converting a level of earnings to determine the business' value.
What to do After an Appraisal
Once the valuation is complete, the business owner knows where their company stands and can take the information provided by the valuation company to either confidentially list their business for sale or to make improvements based on that information to help improve their company's valuation. What are some of the areas that a business can improve?
- Branding: Branding makes your business unique and helps build customer loyalty and repeat purchases. By building a brand, you're building a strong future for the business you're selling and are increasing its value through future sales and growth.
- Proprietary Assets: What does your company do that is not easily copied? If you have products, services or business methods that are completely unique to your business and industry, that goes a long way towards building additional value in your company.
- Differentiation: Do you offer specialized knowledge or services that no one else can? Differentiation helps protect a business from economic downturns by making it a necessary service or product even when times are tough.
Once you've had a business valuation completed, you know where you stand and can dictate a firm price and the knowledge of exactly what aspects of your business justifies that price. Business valuation firms are a vital part of that process. Contact us today to discover the true value of your business.