Business evaluations are an economic analysis, or a professional commitment, to conduct business valuation in order to determine the value of a business, professional practice or certain business assets. It is an essential tool in the arsenal of business owners and should be considered from the day the business concept emerged during the life cycle of the company.
Reasons for evaluating business
These are the top ten reasons that make you get a certified business assessment.
– Your work is in the beginning stage and needs to be evaluated to determine how much you will have to offer to investors in return for initial capital.
– If it is a well-established trading company and you must provide quarterly or annual updates to your investors or other interested parties. This will give stakeholders a clear picture of the financial condition of the company that shows them exactly the value of their current investments.
– You can find a chance to sell or merge, which you must decide quickly. Assessing up-to-date business allows you to take advantage of opportunities.
– You may want to hire a new partner and need to know the value of your business to determine the purchase price.
– With the diversity of new fundraising options available to small business owners, it is important to know the value of your company before you start raising funds.
– You may want to expand or build new facilities, and taking your business assessment to the bank will help you make a decision to lend money.
– To determine the annual value per share of the ESOP. ESOP is used when you want to share your company’s ownership with your employees.
– For voluntary tax planning purposes, such as transfer of interest to family members, donation to charity, transfer to intentional donor trust, etc.
– For litigation support purposes, to identify economic damages, loss of profits, discovery of fraud or the value of a company in a dispute for shareholders or partnerships.
– Determine whether the business is growing, stagnant or decreasing its value to restructure the company.
Business evaluation techniques
Some of the business valuation methods are:
The assets approach examines the assets of the company to determine the value of the company’s assets. This method will be particularly important for the business being closed and in the liquidation process.
– Revenue approach
This approach focuses on the main objective of the work, the income generated by its operation. Detailed discoveries are made and analysis of different income streams and types of expenditure. The future revenue and expenditure projections are also taken into account.
– Market concentration
This approach treats work as a body available in the market for buying or selling. This method is based on finding similar or similar businesses in the recently sold market.
This list is not exhaustive and there are many other reasons why commercial valuation may be necessary. A commercial assessment adopted is a complex financial analysis that must be performed by a qualified assessment specialist with appropriate credentials.