Did you know that most business owners can tell you what their house is worth, but not what their business is worth? However, knowing the value of your business before you’re entering a sales negotiation is absolutely critical to achieve the best result for you.
A business appraisal will provide you with an edge when selling your business. The more knowledge you have and the more presentable your company is, the more likely you will be to sell at a higher price.
The valuation of a business is extremely complex because of the diversity of companies, industries and individual business performance that need to be considered.
The true value of your business is effectively what any potential buyer would be willing to pay at any particular point in time.
Most investments involving the acquisition of businesses are obviously motivated by the desire of the investor to make money.
The three drivers that generally influence a valuation decision is:
Some companies have developed intellectual property over years of research and development, packaged it and built it into a recognized brand name. In this case we need a mechanism to not only value what sales are today but also to take into account the past development that will stimulate sales in future years. An investor that buys this company will reap the rewards of that R&D (Research & Development).
Even if we look at one particular industry and take two similar companies (in terms of their sales and profit performance for the last year) we might justifiably pay more money for one over the other.
Some matters that might lead to a difference in the valuation:
Then of course there are the intangible reasons:
Your business valuation will be less if:
Due to the complexity of business valuations, it is best to have an expert by your side who can assist with the calculations and determine positive and negative factors influencing the value.
Ascend Business Partners provide a business appraisal that identifies business risks and opportunities to protect and enhance the value of your business, the key issues that a potential buyer would consider in acquiring/merging the business, and provides insights into the value of the business.
If you want to find out more about business appraisals, please contact us on 03 8794 7777 or firstname.lastname@example.org. You can also book in a free 1-hour “Time to REFIRE” workshop with Greg Johnson here!