In a nutshell, a business valuation is an analysis that helps you know what your business is worth if you’re thinking about selling. There are many different considerations involved and many different variables play into determining how much a business is worth. These variables can be divided into five different categories: location, customer base, capitalization, financial health, and competitive positioning. These categories can be very broad and it would be difficult to determine how your business should be valued without actually having done the valuation. But here’s a short handout that can give you a good idea of how these categories impact your valuation.
Location is one of the most important categories of your business when you’re selling. If you don’t have a strong presence in a particular geographic area, then people might be less likely to buy your product or service. This is because no matter how good your product or service is, if you don’t have a place to sell it, no one’s going to buy it. That said, business valuation services can help you analyze the demand in your current area to better assess the potential in selling your business.
Customer base is extremely important when considering your options. Without customers, you won’t generate any revenue and therefore will not be able to operate your business as well as you’d like. Obviously, you don’t want to leave any customers behind, but doing a simple market analysis of your competition can give you some good insight into the success of other companies in your field. By consulting business valuation services, you can see how well your products and services compare to those of your competitors, helping you make the right decisions for your company.
Capitalization is extremely important when valuing a company, but you also need to keep an eye on the overall financial health of your company. One good indicator of a company’s health is the number of shareholders. The number of shareholders speaks to the health of a company because it shows what percentage of the ownership is being invested in the business. If there are relatively few shareholders, then this may indicate that the company may be losing money. On the other hand, if the number of shareholders is high, then this could mean that the company is actually profiting from its stock.
Marketability refers to how easy it would be for a buyer to purchase your company. If a buyer believes that his/her funds are sufficient to take over your company, then this is known as marketability. Valuing a company based on marketability is very difficult. However, you can determine whether or not a company is marketable based on the industry it is in and the number of years it has been around. Companies that have been around for long enough typically command a decent market price for their shares.
Business valuation can be a complicated process. Although it can be very time consuming and frustrating, it is imperative that you follow through with the process in order to get the most out of it. You must also ensure that the business valuation is fair and accurate. There are many ways to do this and one of them is to hire a business appraiser. Appraising your business yourself is never recommended because you will never really know if the figures you are getting are correct. Having a professional assess your business will ensure that all of the numbers add up.
