Whether you’re looking to buy a business, sell your stake in one, or simply know what one’s worth, proper business valuation is essential. That said, far too many people are unfamiliar with the practice and the benefits it can bring them. So what is business valuation all about, and how can it help you make the right business calls?
Evaluating a Business
To begin with, business valuation means taking into account the different factors that make a business valuable in the first place. This can include everything from the physical office space and fixed assets owned by the company to its cash flow and clientele to its potential for expansion in the marketplace. If it can somehow help expand your business, chances are that it factors into the business valuation equation.
That said, business valuation is as much an art as a science and thus as much educated guesswork as it is predictive. Treat business valuations as a general weather forecast rather than a crystal ball.
Some of the most important criteria to be taken into consideration in the course of a standard business valuation include the following:
- A company’s ability to capitalize on an active market and corner even more of that market share for themselves, either by outright expansion or by taking over or merging with competitors
- Calculating revenue streams and extrapolating future earnings from that
- Looking at the books and calculating a company’s value based on what the balance sheets say
- Looking at liquidation possibilities and determining how much liquid capital could be extracted from the company in the event that it was liquidated
You’ll also want to make sure that you are having an accredited firm valuing your business. Those holding a certificate denoting them as Accredited in Business Valuation (ABV) are your best bets here for accurate estimates from trained estimators. Accountants and other trained business analysts are a great place to start when looking for these services.
Your company and future are worth something.
Find out how much with the help of a properly accredited business valuation expert.