If you’re buying or selling a business, the process should include a business valuation – a professional appraisal that goes to great length to determine the fair dollar value of the company. As a potential buyer, you will carefully review the detailed results of a valuation before making an offer.
As a seller, you want to ensure you are paid for the full worth of everything you worked to achieve, while also attracting the right buyers. Valuation methods are unique to each company, and depend on the age of the company, historical documentation, similar sales within the industry, and current economy in addition to the expected current sales and bookkeeping records. The final assessment can be presented in a range, from current estimated worth to near-future potential, and beyond, depending on the needs of the valuation.
Beyond a straight sale, a business valuation is useful in preparation for an internal re-organization, and personal transactions, such as passing the family business down to the next generation. If you’re working on a deal to sell to family or friends, you may be tempted to waive the valuation process and calculate the sale price internally, but the full worth of a professional valuation goes beyond the final number. A proper valuation can go a long way to negate surprises and provide the new owners with a complete look at what they’re taking on. It’s especially helpful when looking ahead at changes to their tax file. Particularly as a parent, you want to ensure that the passing of the torch goes smoothly for your children. You may even find good reason to stay on as part owner to support your retirement plans.
Lastly, but equally important, valuations are vital when courting investors, negotiating mergers, settling legal obligations both professionally and personally, as well as estate planning and settlement.
What you can expect from your valuation process is a thorough examination of the past, present, and future of your business, plus comparisons to recent sales of similar companies. Analysis methods vary and depend upon the industry, establishment of the company, ownership agreements, start-up investments, debt, intellectual property, and physical assets. They also depend on whether you require current market value or investment value. As the years of your success move forward, you are likely to find yourself in need of more than valuation.
The actual process of the analysis is dynamic and comprised of many parts. Your analyst will sort through years of records collecting relevant information, comparing current trends, and completing a fully-valued and documented file. Racolta Jensen LLP can provide you with an efficient, timely, and trustworthy valuation. Leave the number crunching and comparisons to us while you remain fully focused on today’s business. to begin the process by calling (519) 622-1485.