The Purpose of Business Valuations

If you are the owner of a business and you think it’s about time you retired or simply if you want to sell your business for personal or professional reasons, you are definitely going to need a business valuation and a good accountant. Selling a business, be it a small or a large one, is a big step and it should be done with the assistance of professionals.

For those of you who are not familiar with the terms, Business valuations represent the process by means of which we determine how much a business is worth. Usually, valuation is used to estimate the selling price of the business and to resolve business or legal disputes. Although this sounds quite simple, if you want concise, clear and fair Business valuations we suggest resorting to experts in this field since they know their business.

The most frequent issue when it comes to Business valuations is setting a value on all the assets of the business, including the intangibles such as good will, the trade mark, the client list, etc. For a fair and exact valuation of your business you will need to resort to the services of an appraiser, but be careful because there are several types of appraisers and you must choose the one you need.

A professional business appraiser will tell you that there are several types of Business valuations methods and that these methods will help you determine a fair price of the business that is to be sold. If you are selling your business we don’t recommend doing the valuation by yourself since you won’t be able to give a fair price and to make an honest estimation. The business valuator will determine the value of your business by means of the asset-based approach, earning value approach and market value approach.

The first approach that was mentioned above helps the business valuator to determine the net cash the owner would receive if all his assets were sold and his liabilities paid. By means of the earning value approach, the appraiser determines an expected level of cash flow for the company, basing his estimation on the company’s record of earnings. Finally, the market value approach establishes the value of your business by comparing your business with other similar ones that have already been sold.

Another aspect that should be dealt with the proper importance when selling your business is Accounting. If you have decided to sell your business, you need to know that your Accounting will be verified by the possible buyers and that it is in your best interest to offer them accurate reports. If you are having a hard time keeping track of your expenses and gains, it is better to hire an accountant. Thus, he will be the one doing the Accounting and making sure that everything is in order.

It is essential to budget your business in order to attain your goals. An efficient Accounting record will help you plan, control and evaluate your business. Book keeping is not easy if you don’t have experience in the domain and the right thing to do is hire a professional accountant who will keep the record of your expenses. When you sell your business, the future owner will certainly want to see your book records and you might lose buyers if they aren’t in order.

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