Business Valuation Blog | Understanding Buying / Selling a Company

How is Non Profit Business Appraisal Different Than Other Valuation Types?

Posted by Business Valuation Specialists LLC on Jun 10, 2019 8:00:00 AM

Valuing a Non Profit Business

When you run a charitable organization, non profit business appraisal may be the furthest thing from your mind. After all, if you're not in it for profit, why does it matter what your organization is actually worth? As it turns out, quite a lot! The value of your non profit provides you with plenty of options in terms of financing special initiatives, getting your tax paperwork completed correctly and so many more important areas. Here's a look at how non profit organization appraisal is different than other types of valuations and how that impacts your company's bottom line.


How is Non Profit Business Appraisal Different Than Other Valuation Types?

Let's start by looking at what a non profit actually is: an organization set up through the IRS that is not focused on making a profit, but has a completely different purpose, such as providing clothing to the poor, helping veterans get back on their feet, putting out fires through a volunteer fire department, spreading their spiritual beliefs or sharing a political message. Any of these organizations do amazing work on a daily basis in making our world a better place.

However, it's important to also consider the financial aspects of your organization. Though you're not focused on making a profit, a certain amount of money must come in to ensure that the lights stay on and outreach can continue. This requires having accurate financial records of your organization's overall value.

This value spreads far beyond simple asset worth, such as the value of your forklift in the loading bay or the printer that is used to spread the word. It includes a wide range of intangible assets as well, such as your reputation in the community and the goodwill that brings about, which in non profit organizations, often translates into donations that help you keep your operation moving.

For these reasons, it's vital that a non profit be valued so that you can leverage these intangible assets. If the bank knows you have a certain amount of money coming in every month and that you're not in debt up to your eyeballs, they're more likely to approve the funding you need to open that new youth center, outreach office or operational loan to keep things moving when money is a little tight. Having a business valuation report available for them to check value against makes this process much easier.

What's more, this information helps you ensure that you're keeping appropriate levels of insurance coverage in place for your organization. Whether it's to take care of lawsuits from that opposing group across town or to take care of costs when your antiquated structure that was donated to the cause burns down, this insurance covers the cost of getting back up and continuing the fight.

Though a non profit business appraisal may be the furthest thing from your mind when you're handing your organization's daily business, it can have a strong impact on your overall operations and your ability to impact positive change in your community and the world at large. Whatever your organization's focus, consider having an appraisal performed by a certified business valuation specialist to ensure that you're able to protect your assets when it matters most, so that you can keep your good work rolling forward.

Topics: Non Profit Business Appraisal