Business Valuations

WHY WE DO THEM AND HOW OFTEN SHOULD WE DO THEM? 

As the economic climate continues to change it is becoming more important for you to keep close track of your business’ value.

Business values go up and down, and even if you had your business valued only a year ago, it probably won’t have the same value today.

Your Business Is in the Startup Phase

If your business is in the startup phase, you will need to value it to determine how much of it you will have to give to investors in exchange for seed money.

You Provide Quarterly or Annual Updates

If you have an established business and have to report to investors or other stakeholders on a quarterly or annual basis, you can include an updated company valuation as part of the presentation. This will give your stakeholders a clear picture of the financial health of the business, and also provide them with a comprehensible metric that shows them exactly what their investment is currently worth.

You’re Fundraising

With the array of new fundraising options available to small-business owners, it’s important to know the value of your company before you begin. For instance, it is now possible to use crowdfunding to ask nonaccredited investors to buy actual shares in your company as a way to raise funds. But to determine how many shares you will give for a certain investment, you must first assign a value to your business.

You’re Selling Your Business

To determine your company’s fair market value, a business appraiser will need to perform a formal valuation. This is the first step in selling your business, and it will help identify the key areas of value you can use in the negotiations. In addition, the valuation will point out areas of weakness that you can improve on to sell the business for as much as possible.

Keep in mind that whenever you conduct a formal business valuation, it will be assigned a valuation date. In the eyes of the market, your business value will remain the same from that date until another valuation is performed.

Most experts recommend conducting a business valuation at least once a year.

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