Why a Business Valuation Important to Your Business?

Why a Business Valuation Important to Your Business?

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As a business owner, it is critical to understand what the value of your business is. Not only does having your business valuation helpful to understand where your business is at and how that can impact your opportunities to grow. A business valuation also provides you with a variety of facts and figures that help you understand what that value is based on market competition, asset values, and income values.

Here are three ways that a business valuation is critical to the health of your business.

Deeper Understanding of Your Assets

When you have a current business valuation, you have the information to obtain the right insurance coverage, how much to reinvest in your business, what you can sell your business for and if that amount will allow you to make a profit. All of this information can impact the costs of running your business, but also impact your business plan and long-term exit strategy.

Having a Clear Picture of Your Resale Value

Another key is that you have greater knowledge of what you can sell your business for based on its current worth. Perhaps you want to sell it in a couple of years. Doing a valuation lets you know where your business may be weak and allow you to concentrate on those areas, thus increasing the value of your business to meet your resale goal valuation.

It can also help you to negotiate for a higher selling price and give you the figures to justify that price to the seller.

Helpful During Mergers or Acquisitions

As part of your efforts to grow your business, having a business valuation is key to show the value of this business as an asset for mergers and acquisitions. Major corporations can attempt to acquire or merge with your business. Knowing the value of your business is key to make sure that you do not take a low-ball offer.

Understanding what your business is worth can also help you to negotiate with investors to get capital for expansion or marketing plans to help take your business to the next level.

Clearly, there are plenty of reasons to get a business valuation completed. In order to make sure you have accurate numbers, you should complete a business valuation at least once a year. This process will allow you to do comparisons from year to year and set goals regarding growth and to highlight areas for improvement.

Looking to complete a business valuation? Contact us today to discuss your business needs.

Parker Business Consulting & Accounting, P.C. is a unique firm with more than a combined 75 years of experience in private industry, coupled with a strong background in public accounting. This combination enables us to provide valuable assistance based on direct experience with many of the same issues faced by our clients.