The face of business has changed beyond recognition in recent years. They are no longer businesses for life; in fact, most entrepreneurs seek to make a living by selling. Therefore, ensuring a good valuation is very important, and a good number can be useful even when you do not plan to divest.
If you are thinking of selling your business, the main question is what you can expect to get for it. However, keep in mind that this is a number that is not absolute. Different circumstances and individual perspectives can have a definite influence on the value attached to your company.
Even if you don’t plan to sell right away, getting a credible valuation can go a long way, especially if you’re trying to attract venture capitalists or strategic partners. On top of that, it also grounds your optimistic expectations and tells you exactly what to expect.
So how does the valuation process work, and how can you get a great one for your business?
Professional valuation analysts will want to see the following before throwing out a number:
o Assets: including productive assets, intellectual property and order flow
o Financial statements for the last few years
o Employees, customers and other stakeholders: to find out what they think about the business
With that said, different appraisers may view your business in totally different ways.
So who you appoint to do the work is just as important as anything else you can do to keep the business healthy.
Some advices:
o Get a like-minded person for the job. A Thoroughbred accountant is likely to give you the most pessimistic assessment, as you will be quite risk averse. If you can, appoint someone who has worked in the industry, or better yet, has some experience running a business, who places value on opportunities.
o Get a fair price for intellectual property. Several companies do not give enough importance to their brand names, trademarks and other copyrighted properties, which can actually bring in quite a sum. Make sure they are included in your case.
o Choose an enthusiast. Look for more than experience and technical skills when hiring an appraiser. If he or she has a vested interest in your line of work, you are likely to do better.
o Time it right. Choose to do a valuation when things are looking up in the economy, in the stock market, and for your industry as a whole. No matter what happens, you can’t run away from the basics, so make sure your company’s future looks good by the time the appraiser calls.
