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Why a Business Owner Should
Consider a Valuation
In today’s advantageous market, many
business owners still leave substantial money on the table when they
sell their companies – most often because they do not truly have a
handle on their company’s value. For that reason, the valuation process
is a true asset to the business owner and a thorough, professionally
prepared valuation will assist them in:
·
Helping identify the key value
drivers, major strengths, and more importantly, the major weaknesses of
a company allowing the owner to solve both obvious and hidden problems
prior to the selling process.
·
Determining a reasonable
selling price. Many owners rely on general rules of thumb, casual
advice from friends, or other similarly unreliable sources. Values
determined by general multiples or rules of thumb may be too high or too
low. Unless the business owner goes through the valuation process, he
just will not know. If the owner’s expectation of value is too high, it
will prolong the selling process until a price concession is made. If
the price is too low, money is left on the table.
·
Fully understanding the value
of the business will assist during negotiation. In this market, one can
expect buyers to be sophisticated and experienced. They will conduct a
rigorous analysis of the company even if the seller has not. They will
look at those factors and value drivers that the owner and his advisors
should consider in valuing the company, and they will use that
information against the seller in negotiations if allowed.
The
valuation process can be divided into 5
steps:
-
Determining
the purpose of valuation, date of value, and ownership interest being
appraised
-
Obtain and
review key elements of the business which includes but is not limited
to: Corporate Documents, Financial Records, Market, Key Personnel, Key
Customers, Industry Trends, and Comparable Sales of Similar Companies.
-
Determine
value indications of the business and owned non-operating assets using
3 categories of valuation approaches: Asset, Market, and Income.
-
Determine
final opinion of value after consideration of all information
obtained, reviewed, and analyzed and making appropriate allocations
for goodwill and other intangibles the business possesses.
-
Prepare
written report
Experience
Our senior valuation analysts have experience in valuing businesses in a
variety of different industries including manufacturing, distribution,
retail, healthcare, banking and finance, engineering and high
technology. This diverse background allows us to knowledgably undertake
valuation and litigation assignments for virtually every possible
business and purpose.
15 Situations When a Business Owner May Need a
Valuation
Why Rules of Thumb Don't Work
Alliance
Business Ventures will provide
a FREE
no obligation consultation.
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