Business valuation involves both a quantitative and qualitative assessment of your company, to determine its price and value on the market. To establish your company’s value, a business valuation analyst/appraiser looks at several factors.
Business Valuation Factors:
- Revenues
- Expenses
- Financial reports
- The economy
- Your industry
- Your company’s internal structure/ management
It’s not just about the numbers, though. Also, a business valuation analyst/appraiser will dig deep into what influences those numbers to discover the potential risks in owning this business, as well as the potential for generating future income. We spoke with Pam Oliver, owner of Horizon Business Valuations LLC, to find out more. “The business valuation process is comprehensive,” she told us. “We’re trying to determine fair market value for stock of a privately held company. It’s not like a public company where you can open up the Wall Street Journal and find its current market value.”
Reasons to Have Your Business Valued
There are many reasons for a company to undergo a business valuation, which you can read about here. Once you decide to do this, you must have your facts ready. First of all, before you have your business valued, you will need to gather information, including the following:
- 5 years of financial history (statements prepared by CPA are best, but tax returns can also provide the needed information for this process)
- Information on employees, management, and owners
- Information on customers, suppliers, and competitors
- A list of business assets (assess real estate by itself)
We’d like to thank Pam and Horizon Business Valuations LLC for sharing info on this subject. In conclusion, Pam also recommends calling Ten Key, Inc., to help you prepare for a business valuation. In this way, you can make sure your accounting and bookkeeping is in order. (As we always say, having a clean set of books makes everything easier! As a result, your valuation will go more smoothly.)