No matter what stage of your business journey you’re in - whether you’re just starting up or it’s time to sell - knowing the value for your business is essential.
If selling or exiting your business, valuation can help you assess the selling price. While for new businesses, knowing its value in the early stages gives you a benchmark to determine the right strategies for driving its growth.
With FY20 just around the corner, now is the time to get a proper appraisal of your business. Here’s why a business valuation can set you up for success and a secure future.
What is a business valuation?
A business valuation or business appraisal is a process of estimating the economic value of a business. It’s used by both buyers and sellers to determine a fair price for a business.
The process of valuations can vary between evaluators but will commonly involve a number of objective measures, including analysis of the company’s management, its capital structure, future earnings prospects and the market value of its assets.
Why do you need a business valuation?
No matter where you are in your business journey, you need an accurate estimate of how much your business is worth. Even if you’re just starting out.
Planning on growing your business? You’ll need to determine a benchmark value to compare your annual growth. More importantly, a comprehensive business valuation details all the factors driving the value of your business, so you can develop strategies to address any factors that are negatively impacting your business’s worth.
Maybe you’re seeking funding. An up-to-date valuation also acts as a snapshot of your business for potential investors and strategic partnerships. If you’re a startup seeking investment, knowing the true value of your business gives you the opportunity to quickly seize opportunities.
For those looking to sell their business, whether you're approaching retirement or are planning your exit strategy, you’ll need to be prepared. A valuation can give you an accurate indication of the value of your retirement nest egg, giving you insight into what strategies to put in place to achieve a comfortable retirement.
There’s also a range of not-so-fun reasons for valuing your business. Divorce, legal disputes, death. We might not want to think about it, but when life serves an unexpected turn, it’s a smart move to be prepared. Up-to-date financial records of your business will help you protect yourself and your family during any legal proceedings.
Why you shouldn’t evaluate your own business
While it’s a smart move to be across the different valuation methods available, you should never attempt to appraise your own business.
Sure, no one knows your business better than you do, but you’re way too close to see the forest from the trees. Valuations should be objective assessments, and nine times out of 10, a business owner will overestimate how much their business is worth. The factors that influence your business’s value are too numerous - better left to the experts that do this every day.
That’s why it’s important to work with an expert and objective evaluator to determine the value of your business. Not only will this ensure an accurate appraisal of your business based on industry best-practice methods and tools, but you also benefit from having an advisor who can help you determine the best approach for plugging any gaps in your business strategy.
By knowing what factors are driving your business’s value, you can make more confident decisions about its future. Working with BlueRock means you also get to tap into a community of professional services, helping you to develop the right strategies to protect or grow your business, whether you’re just starting out or it’s time to sell.
Take our no-obligation valuation survey
Keen to take the first step towards making better decisions about your business? Take our no-obligation one-minute survey to gain instant insight into what your business is worth and what strategic factors are influencing its value. By knowing where your strategic blind spots are, you can start working on closing the gap and growing the value of your business.