Interested in finding out the market value of your business? A business valuation will help you to determine exactly that.
Useful for both entrepreneurs and small business owners looking to buy or sell a company, a business valuation uses a series of measures to arrive at a sensible figure for a business’s worth.
There are many reasons why one might require a business valuation. These include:
- Company valuations for sale
- Shareholder exit and minority valuations
- Management Buy Outs (MBOs) valuations
- Company valuations for acquisitions
- Company valuations during a divorce
- Expert witness company valuations
- Probate valuations
- Investment valuations
- Options valuations for audit purposes
- Valuations for tax and HMRC purposes
One of the most common reasons for a business valuation is to secure financing for your company.
This can include obtaining loans from banks or other financial institutions or taking out equity investments from investors.
When you apply for financing, lenders or investors will want to know what your company is worth. A business valuation is the best way to provide this information.
How does a business valuation work?
The value of the business will depend on how much money it makes and how much profit it generates over time.
For a quality valuation, you will need accredited forensic accountants who have been trained in the latest market trends and techniques.
Sometimes you may not need or want a full valuation report. What you may want to know is, at a high level, what businesses like yours are selling for.
This is usually expressed as a multiple of a measure of profit or revenue.
In some cases, research is conducted into pools of similar buyers, identify their business models, and determine not only what the multiples are, but we also evaluate the extent to which different business models seem to create higher value.
This can be a very powerful tool for businesses who are going through a strategic planning exercise or preparing for sale.
How is a business valued?
In terms of valuing a business, this is not an exact science. The actual value can only be determined by negotiations between an informed and willing buyer and an informed and willing seller.
Professional practices for example, are usually valued using one of three valuation methods:
- Applying a multiple to maintainable fee income
- Applying a multiple to maintainable net profits or earnings
- Valuing the net recoverable assets of the practice and determining whether to add an element for goodwill
The valuation does not tend to be lower than the value of the net recoverable assets of the practice.
Also, if the practice was to cease trading, the valuation would be based on the break-up value of the net assets.
On this basis, the net recoverable amount of assets would be lower than that of a continuing basis.
How Williamson & Croft can help
Our firm has built up a reputation for providing quality valuations across the North West, and we are proud of our team of accredited forensic accountants who have been trained in the latest market trends and techniques.
We are confident that we can help you with your business valuation needs – whether you need a simple appraisal or a more in-depth review of your company’s financial status.
For transaction service providers you can count on, contact Williamson & Croft today.