10 IMPORTANT REASONS YOU MUST KNOW THE VALUE OF YOUR BUSINESS
Determining the realistic value of a business is extremely important and a balance sheet usually will not provide the information needed to make this determination. Also, appropriate techniques used for estimating the value of a business will vary depending on the purpose of the valuation.
ThistleSea Business Development can provide business owners with an inexpensive way to measure your company's value using 5 techniques and provide you with an estimate of the wealth created by your company and a comparison to companies of similar size in your industry.
Business owners typically use business valuations when dealing with the following issues:
- placing a value on the founder's interest in the business;
- valuing your ownership interest as a result of the addition of investors with a reduction in ownership percentage;
- selling or purchasing a business;
- insuring key partners or individual owners;
- developing an estate plan;
- financing;
- developing buy/sell agreements;
- before going to a business broker;
- important measure of management success and an indication of the value you are creating for owners over time; and
- when working with a business coach to identify areas to be strengthen to improve business value and business profits.
Two philosophies are usually deployed when approaching the business valuation. These philosophies are:
1. a business should be valued based on past performance of the business as this will be reflected in the firm's asset value; or
2. the value of a business is the product of its ability to generate income and that the only valid valuation techniques include a business' ability to generate future earnings.
Most business valuations are conducted in an attempt to estimate "fair market value" of a business from either a seller or buyer's perspective. For this reason, it is important to identify those techniques that best estimate the actual selling price of businesses to allow individuals to fairly establish a reasonable market price for a firm.
Valuation can also include factors related to:
· Nature and History of the Business;
· Economic Outlook in General and for Industry;
· Book Value and Financial Condition of Firm;
· Earnings Capacity of Firm;
· Goodwill and Other Intangible Assets;
· Sales Price of Stock and Size of Stock Sold; and
· Market Price of Stock or Firms in Same Industry.
THE BOTTOM LINE: When considering all of the information, most weight is usually given to current and projected earnings, the next most important information is that involving comparing your company to others of similar size in your industry.
Give ThistleSea Business Development a call if you are interested in calculating YOUR company's value.
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Some good reasons to call ThistleSea Business Development?
If you are a business owner or know a business owner who:
- Needs to reduce or eliminate YOUR stress caused by your business.
- Needs to manage fast growth
- Has some difficult business issues or situations.
- Wants to enjoy family, have more free time, better vacations, and build the best company.
- Is losing sleep because of the business.
- Wants to increase the profits and business value.
Give Business Coach John Laslavic, LPBC, a call today at (724) 935-1930 to schedule a free initial consultation.
"Because your business should lead to "Abundance."
