Business Valuation Blog | Understanding Buying / Selling a Company

Small Business Valuation: A Professional Opinion for Professionals

Posted by Business Valuation Specialists LLC on Oct 1, 2015 9:00:00 AM

Small business owners may be masters of multi-tasking, but they can not do everything.  While some small business owners know how to keep the books and can comprehend the legal terminology in a 10-page contract, very few have the training or expertise of a professional. When you run a small business, you depend on attorneys, accountants and other professionals to handle matters that are a crucial part of operating a company.

These professionals help keep your business running smoothly. They provide a variety of services. You can call on them for advice before you make a major business decision. At some point in time, your accountant, your lawyer, your banker, or your insurance agent, may want you to get a small business valuation. 

How do you Know if you Need a Business Appraisal?

Small business owners may be masters of multi-tasking, but they can not do everything.  While some small business owners know how to keep the books and can comprehend the legal terminology in a 10-page contract, very few have the training or expertise of a professional. When you run a small business, you depend on attorneys, accountants and other professionals to handle matters that are a crucial part of operating a company.

These professionals help keep your business running smoothly. They provide a variety of services. You can call on them for advice before you make a major business decision. At some point in time, your accountant, your lawyer, your banker, or your insurance agent, may want you to get a small business valuation.

Attorneys

An attorney may want the professional valuation of a company to support his client's case in a court of law. Legal disputes that turn into lawsuits can center around a disagreement between two parties over what a company is worth. If a husband and wife share ownership in a small business and decide to get a divorce, what will happen to the business? Maybe one spouse will get the business and the other will get the house? Maybe the judge will decree that the business be sold and the proceeds divided equally.  When a couple gets divorced, all marital assets, including the ownership interest in a small business need to be divided. Business valuations in dissolution cases are often required to be able to reach a fair and equitable settlement. 

Accountants

A small business valuation can not be done properly without providing the business appraiser with data that indicates the company's financial position. An accountant is responsible for filing periodic reports, preparing tax returns and creating a variety of financial documents.  Business appraisals are only as good as the available company-specific data.

Bankers

A company valuation may be a prerequisite to obtaining a bank loan for your business. Banks were once more amenable to lending money to small businesses, but after the financial crisis in 2008/2009, borrowers must meet a higher standard in order to qualify for a loan. A positive company valuation can help a company get a bank loan.

Insurance Agents 

The valuation of a company can be helpful when you need to buy insurance. Your agent can best help you determine how much and what type of insurance you need if he or she knows what your business is worth. Insurance can be purchased to cover losses to your facilities and equipment. It can be purchased to protect against loss in liability claims. In certain circumstances, business insurance will cover loss of income. A business appraisal is proof of the value of all of the physical assets of your business. 

Call a Certified Business Appraiser

If your attorney asks you what your business is worth today, would you be able to give him a good estimate? Without the benefit of a recent business appraisal, most business owners would have trouble answering that question. If you find yourself in a circumstance where you need an accurate report of your company's fair market value, call a certified business appraiser.

Topics: small business valuation