6 reasons why businesses need a valuation

Monday 11 September, 2017

In a fast-paced economic climate, valuations are seen by most professionals as a fundamental cornerstone of good decision-making for businesses, now and in the future. While it is impossible to predict the future, preparing for uncertainty is a key differentiator between businesses that survive and those that don’t. 

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1. Selling a business

More than 60% of businesses will seek to change their ownership circumstances within the next 10 years. If you’re looking to sell your business, you want to make sure the asking price is attractive to potential buyers but you don’t want to leave any money on the table if you’re funding your retirement or looking at investing in other ventures. 

2. Buying a business

Buyers and sellers can often have very different opinions on what a business is worth but the real value of a business is equivalent to what buyers are prepared to pay. It might be worth to consider hiring a business broker to create a bridge between yourself and the buyer/seller to ensure the process is as seamless as possible.

3. Selling a share in a business

As a business owner, a thorough valuation will put you and your business into a state of readiness when you’re selling your share. Much like selling an entire business, you need to make sure you’re not leaving any money on the table and getting as much value as possible out of your share.

4. Getting a business loan

Getting a professional business valuation increases your credibility with banks and other funding sources. A well-prepared, balanced and independent valuation can even help speed up negotiations and offer a complete picture of a business's value to yourself and lenders.

5. Attracting investors

Investors are a necessary part in a lot of businesses. Their anecdotal and financial support keeps a business running in its early stages. By having a sophisticated business valuation, this gives any current or potential investors a clear understanding of the business's overall health and what they’re getting into. 

6. Valuing your own net worth

Understanding the market value of your business is essential, even if you’re not planning to sell in the short term. A current appraisal of your business helps inform your strategic planning process and protect the vitality of your operations.

Valuating a business is not a complex task, it just requires your time and effort. In some circumstances, we recommend getting a business broker or professional valuer to assess your business. Whilst it is impossible to predict the future, preparing for uncertainty is understood by many analysts to be a key differentiator between businesses that flourish and those that do not.

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