Business Valuation Firms are a critical component of every business transaction. They must be performed by a reputable Business Valuation Firm for many critical reasons that will be discussed further. The Business Valuation Firm utilized must also be a third party to ensure objectivity of the valuation. Also discussed will be some common reasons why a business owner must obtain a business valuation as well as items that can impact value.
There are many reasons why a business owner needs a business valuation. Any business transaction will need a valuation upfront to justify the asking price and for a buyer to take the seller seriously. Without one, there is little to no chance a buyer will submit an offer on the business. A business valuation also shows business owners where they stand in the market and industry. They can look at analysis of value drivers, strengths, weaknesses and other factors to improve the value and salability of their business. Owners also often use business valuation firms for a valuation for financing, partner splits, divorce, estate planning and many other useful reasons.
Many business owners believe they know what their business is worth. They use a simple calculation to come up with a value. This can be a monumental mistake. There is no one calculation that can accurately determine market value. There are economic, market and environment factors, competition, potential for growth, diversity of customer base, tons of value drivers, similar sales and many calculations that impact value. A buyer reviews all of the items that impact value to determine their comfort and confidence that it is a strong business worthy of an offer.
A few keys that are really important when obtaining a business valuation are confidentiality always comes first, a third party business valuation must be used and it is critical to have experienced representation by a reputable Business Broker like A Neumann and Associates. Most business owners only experience one…