Understanding the importance of a business valuation

Business Valuers Melbourne

You’ve come to the right place, if you’re a business owner looking to invest or sell a business. Depending on your business-related requirements, knowing the true value can help in the decision-making process when it comes to the future of your business.

Did you know your business can be your most valuable asset that you will own, so it's important you know the ins and outs of running a successful business as well as determining the true worth overall.

To determine the value of any business isn’t as simple as looking up the stock price. This is where a business valuation comes in handy, as there are numerous reasons why you may need to value your business and why it's important to choose the right team to get you started.

You might be asking yourself, what is a business valuation? And why would I need one? This blog post we will break down these answers for you, to give you a clear understanding of how a business valuation is a great investment and essential tool in your business journey to success.

What Is a Business Valuation?

A valuation refers to the process of determining the fair market value of a company. There are a number of techniques used and most importantly the type of person needed to complete a valuation should be a qualified highly skilled experienced business valuer. That is specialised in the field of business and property related purposes.

How is a Business Valued?

With a business valuer local to your area, they will inspect the business and conduct a comprehensive report detailing the value of the business. this is determined by

  • By weighing the nature of the business
  • Financial performance
  • Local and national economic conditions
  • Assets and liabilities

Any unique external factors may also be taken into account that may influence the operations of the business. There is no rule of thumb when it comes to the methods used as every business is unique and each business owner has specific requirements for their business valuation purpose. No matter what you are guaranteed a comprehensive, reliable, and detailed result of the value. The valuer will decide which method would be most appropriate for the valuation purpose and outcome expected.

Reasons for a Business Valuation?

A business valuation is important for any business owner, no matter the type or industry you are in. We have listed several reasons why you may need to value your business:

  • Sale of the business
  • Change of ownership
  • Investor/partnership openings
  • Planning to sell part of the company for stock
  • Require a bank loan
  • Detailed information required for the growth of your business
  • Tax purposes/ capital investment

The most commonly used purpose would be for investment or sale. For e.g., if you are interested in investing in a business and believe the asking price is not right, a business valuation for pre-purchase purpose would be recommended to give you an insight in the true value of the business and the potential of the business growth for the future which can save you thousands on your investment.

Another reason would be selling your business, you would then require a pre-sale business valuation that will give you the true value of the business worth, and the current state of the business positioning and how its grown over the years. You can use the value from your valuation to determine the amount you’d like to sell your business for and hopefully this results in a profit from when you first started the business.

In Conclusion, depending on the market demands this will determine the worth of the business, it all comes down to timing and the need for your business within the market, no matter the valuation purpose.

A business valuation is vital for any informed decisions that need to be made, for both the present and the future of the company. A business valuation is a critical financial analysis that needs to be completed by a qualified valuation expert.

Our team of experts are the best in the field for all business-related requirements. We guarantee a valuation service tailored to your requirements, to ensure you receive a report that exceeds the outcome for the future of your investment.