Putting a Price on Success: The Use of Business Valuation

Just because a business is ongoing does not mean it is profitable. In most cases, this may be true, but not in all instances.

As a small business owner, you may be content with knowing that you can keep your doors open another day. Still, to expand by taking in investors, or you need to do estate planning, then you need certified business valuers to appraise your business.

Definition

Your business may be of value to you, but what other people need to know is its true worth. Scolari Comerford defines this as the market value of your business. It may be painful to put a price tag on the product of your hard work, but that is business valuation.

Business valuers make an assessment based on the records of the company. This includes the financial documents, operations, and organisational structure. In most cases, business valuers are part of an accounting firm. The business valuers will give you a certification at the end of the assessment.

Uses

A business valuation certified by an accounting firm or a certified public accountant is acceptable anywhere. It is suitable for tax purposes, or for getting a loan.

To get investors or sell the business, you need one to justify your price. You can also use it to make business decisions, and to do estate planning. The family business may comprise the bulk of your estate, so you would want to know its true worth.

Process

The first thing you need to do to get a proper business valuation is to find certified business valuers. A good one can be expensive. You will also have to get your documents together. Small business owners often do not want to bother because they do think it is worth it. In some cases, this is true enough. However, you cannot expand your business if you cannot produce a proper business valuation certificate. This is why it is imperative – essential, even – to have your business valued at certain phases of your company’s growth.