When you run a small business, you know that you wear a lot of hats, sometimes with limited degrees of success. But when it comes to small business valuation services, you may feel a bit more in the dark than usual. What's involved in the process? What will you need to provide to your business valuation specialist to make the process move along more smoothly? Is it more than just looking at assets versus liabilities? Here's a quick look at the overall process and how to prepare beforehand to ensure a better, faster result.
Small Business Valuation Services: What to Expect in the Process
Going through a business valuation can be a daunting prospect, especially when the business is relatively small. Fortunately, it's not nearly as difficult as it may sound. To start, the appraiser will ask for some details on your company and will almost always request copies of some of your recent financial statements, such as tax returns, income statements, balance sheets and similar information. The appraiser can then take that information and study it to see where your company's patterns fall and where adjustments may need to be made to create a more accurate view of your company's average activities across the years. They may ask for additional information or ask questions about reports that fall outside of the norm.
Once the appraiser has a good grasp of what your company's income has been, they can look at a number of different aspects that may also impact your company's performance. What condition is your industry in? Is the market thriving or failing right now? These aspects can impact how well your company will do in the future, so they have a strong impact on the appraised value of your business.
One question that often takes business owners by surprise is when they're asked for the reason for the appraisal. A company's value should be the same across the board, right? Not necessarily. When a small business is being sold due to the death of the owner, the heirs may be willing to wait for the right owner or may want to dispose of the company quickly, which will impact the selling price. In other cases, one heir may be interested in buying out the others to keep the company in business, in which case those selling will want to get as much as possible while the buyer will want to pay as little as possible to keep the legacy business in operation.
Another area of concern is the importance that your company's reputation, goodwill in the community and innovations will play in the overall value. When a company is known for delivering superior service or products, it will often sell for more than one that offers more average fare, as will a business that has become a fixture in the community. A reputation for innovation in design and services can also quickly raise a company's value much higher than may otherwise be expected.
By knowing what to expect from small business valuation services when you're planning on having your company appraised, you can be better prepared for the experience and can help ensure it moves along smoothly. However, when selecting a business valuation specialist, make sure you look for one who is certified and who has experience in your industry. This will help ensure that the process goes as quickly as possible while making sure the report generated is the most accurate it can be.