IFRS requires companies to do the Fair Valuation of its Investments (in Companies) every reporting period if there are indications of impairment in the value of such investment.
Well, besides the requirement from IFRS, business valuation gives business owners a fair perspective of facts and figures depicting the real worth of the company as per the income values, market competition, and asset values.
If you haven’t had valued your business for the last twelve months, you need to do it now!
Below we will be looking at four reasons why every business owner should get their business valued at least once in twelve months.
1. Keep up with the company’s assets
Estimations aren’t an option in professional markets. Business owners need to have an accurate assessment of their business valuation to be able to show real business worth.
The specific numbers obtained from business valuation service are required by companies to make critical business decisions, especially during mergers and acquisitions. It gives you insight into the percentage of the business you can sell to still keep a profit or the percentage you would want to reinvest to keep profits afloat.
2. Achieve a higher selling price
It’s necessary to know your business real worth if you are contemplating to sell it. By undertaking the professional valuation of your company before opening it for sale in the open market, to allow yourself to access a higher selling price.
The solid numbers in black and white offered by the valuation firm give you a higher standing in terms of negotiating a better selling price of your business.
At Gadlang Management Consultants, we are frequently approached by business owners for value assessment one to two years earlier to its planned sale, as a mean to give them a solid understanding of the business worth as well as to incorporate necessary measures to increase the real value of the business.
3. The Intrinsic Business Value
While getting a general assessment of your business worth is easy (you can have it by assessing open data like stock market value, bank accounts, assets, etc.), there is much more data to integrate to be able to come up with a real intrinsic value of a business.
Working with a reputable business valuation provider, business owners also get an insight into the income and growth over the period of previous five years and would be recommended changes to improve business systems and processes and improve growth.
4. Prepare for Mergers & Acquisitions
Perhaps the most pressing need for a fair valuation of the business is during mergers and acquisitions. When a large company shows its interest to buy your business, you need solid numbers in black and white to show them the real worth of the business, as well as the growth pattern retained over the years. This is important because all major corporations will try to buy out your business for as low as possible and your only solid chance to negotiate a fair deal with them is the business valuation report.
All business owners should target the assessment of business value at least once every twelve years. Once, you have the numbers from the valuation report, the next step could be taking steps to improve the overall value of the business to achieve a better standing for future expansion or mergers & acquisitions.