Business Valuation Blog | Understanding Buying / Selling a Company

Take advantage of digitization by valuing a high-tech firm

Posted by Business Valuation Specialists LLC on Aug 1, 2018 3:06:00 PM

Digitization. It's a hot buzzword everyone in the business world is talking about, with implications on every industry and sector. But did you know that valuing a high-tech firm can help you determine whether it would be a good investment with the digitization trend? Before you invest in a business for its potential with digitization trends, it's important to learn its value and all the aspects that determine that value. Here's a quick look at how you can use a valuation to determine where your new business would fall in terms of digitization.

Take advantage of digitization by valuing a high-tech firm

Because digitization is such a hot topic right now, a lot of businesses are willing to throw a lot of money at the situation in an attempt to take advantage of something they don't really understand. Let's take a minute to define exactly what digitization is and how you can take advantage of it by investing in a high-tech firm.

Digitization is an overall change in how we do business. It's a switch to mobile technology, supercomputing power, analytics, the Internet of Things and a customer-focused business model. It's causing disruption as new enterprises like Uber, AirBnB and Amazon take over the market share from traditional businesses. It's part of what's causing the ship-to-store craze and the pervasiveness of being able to track the order you placed last week, no matter where it goes. It's building transparency into business processes so that customers are comfortable with the companies with whom they do business.

If that seems like a complicated concept, it is. But it's also the way the world is going. So how can you take advantage of this change? It's easy to invest in a high-tech firm, but it's much more important to invest in the right high-tech firm. It used to be that startups had tons of money coming in from the hope of investors who wanted to find the next Microsoft. Unfortunately, the stakeholders in those companies didn't always invest those funds wisely, choosing instead to purchase obnoxiously expensive desk chairs and similar frivolous purchases.

Fortunately, there is a solid way to separate technical companies into those that are good investments and those that are poor investments. A business valuation takes a good, solid look at the business, from finances and operations to market share and competition. One area of particular interest to investors is the company's reputation for research, development and innovation. If you're hiring a certified business valuation specialist, they should be able to tell you if the company does well in adapting to changes that have come along and where they compare to other tech companies that are going through the digitization process.

By valuing a high-tech firm before you make an offer, you can determine exactly what to expect from that firm in terms of digitization. But don't settle for guessing figures based on similar businesses, what a real estate agent estimates or a friend in the tech industry thinks its worth. A certified business appraiser uses a wide range of calculations to determine a business' value based on tested methodologies that have come under strong scrutiny in legal, insurance, financial and tax circles. Only a certified appraiser can provide you with the true value of a company.

Topics: valuing a high-tech firm