When you spend your work life in the creative process, surrounded by mixers, musicians, sound and instrumentation, the value of your business may be the furthest thing from your mind. But that value can make a huge difference to your taxes, prospects for future financing, insurance claims and similar areas of interest. One of the easiest ways to prove that value is through a business valuation. But what happens during the appraisal of recording company business values? Here's a quick look at the inside track on how this process happens.
How Does the Appraisal of a Recording Company Business Work?
Like many industries, the recording industry can have its ups and downs that can impact an individual business' value, as well as a wide range of other aspects that impact value. For that reason, it's of vital importance that you work with an experienced professsional business appraiser who understands the nuances of your industry and its related values. This ensures that they're taking more into account than the simple value of your equipment, property and other business assets, to include income potential, market forces and similar aspect.
The business appraiser will start by gathering some basic information on your business. This may include the type of work you do with the community at large that can build intangible assets, such as goodwill. They may ask about your competitors and areas where your business stands out in the market. Once they've gathered some basic information, they'll continue to do research on your company.
Next, they'll look over your company's finances. Do you have a lot of bad debt that could be handled otherwise? Did you have a really huge project or huge investment one year that is throwing off the income projections for surrounding years that will require an adjustment? The business valuation specialist will look at this information and provide you with a journal adjustment, if necessary, to normalize income around those types of events.
Your company's position in the marketplace also requires some level of consideration. Do you have a reputation for being absolutely stellar at specific types of music or recording? Do you have people on staff who bring in business due to their fame, experience or expertise? Have you developed certain techniques to improve the recording process and limit studio time? Any of these aspects can impact your company's overall value and should be taken into consideration during the process.