8 Things to Know About Business Valuations

business hand clicking valuation button on search toolbar

From asset values to income values and from market competition to knowing your company’s worth, getting a business valuation is beneficial for a wide variety of reasons. Business owners often get caught up in the day-to-day of running their company and neglect to look at their organization from a different perspective. In fact, far too many business owners actually disregard their business in this way purposefully, viewing valuations as a waste of time and money. For many, business valuations are only considered when an exit strategy arises. However, savvy entrepreneurs understand that doing regular business valuations is a necessary and important investment of both their time and their money.

Business valuations offer a unique feedback of a company’s worth, its place in the market and industry cycle, and on realigning its short-term and long-term goals. Take a look at the following insights about business valuations:

  1. It is a mistake to use approximations to determine a company’s assets. The exercise of business valuation offers an accurate assessment and in turn enables a business to properly obtain things like the right insurance coverage and an understanding of how much should be reinvested into the organization.
  2. Attaining a true value of a company is imperative to having a sound understanding of how much the business is actually worth. With a reliable valuations company, this information will be accurate based on things like total asset value, the stock market value, and account balances.
  3. Valuations serve a critical purpose in relation to creating a buy-sell agreement. Ascertaining the buyout price is vital to knowing the funding needed.
  4. Getting a business valuation internally is not a good idea. A third party valuation analyst has the qualifications, experience, and objectivity needed for a precise valuation.
  5. The ability to create an offensive move against mergers/acquisitions is extremely beneficial in the event that a major company is looking to purchase your company. Since they will undoubtedly attempt to pay a little as possible, it is important to be proactive in your ability to prove your company’s true value.
  6. Obtaining a business value from an online valuation calculator is not at all a legitimate method. There are simply no shortcuts when it comes to business valuations, so a business appraiser must be hired to do this work.
  7. Sometimes business valuations are needed for things like tax reporting or even litigation. In both scenarios, a qualified valuation analyst is highly recommended and often required.
  8. While business valuations do not technically expire, it is a good idea to attain an updated business valuation regularly to ensure that the information is accurate.

Successful results often hinge on the most trustworthy, thorough valuation of a business or other enterprise. As such, at Ellrich, Neal, Smith & Stohlman, P.A., we emphasize continuing education and professional depth among our partners and staff. We are mindful of the complexities and nuances in valuing closely-held businesses, and bring our expertise to bear in each business valuation engagement. For more information on our valuation services, contact our office today!

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