As a business owner, you are contemplating the purchase of another company. Will it be beneficial to you? To find out, you must ask yourself how much the company being acquired is worth.
One of the first steps to selling a business, or developing an exit strategy, is determining your business’ value or valuing a business. MN business owners have little idea what the value of their business on the current market is because valuing a business is a complex process. Once you understand an approximate value, your advisor can help you prepare to sell your business when you are ready.
Let’s Make a Deal
In this economy, many businesses are selling their companies to larger companies or people ready to dive into the industry without starting from the ground up. On the other hand, others are merging, hoping that the two companies combining resources may provide more stability for success. All of these transactions require planning and performing due diligence with data on hand to make the best deal for all the parties involved. That is why choosing a firm that employs a marketing and business development professional who can carefully target a list of perspective clients is a sure avenue to success.
The Valuation Phase
When you are ready to value a business, gathering the data necessary to complete the assignment is key, this will include information provided by you, the business owner, data on the industry, current economic conditions, and information on the financial markets.
Once the data is gathered and compiled a valuation can begin to take shape. Make time for some on the job visits or tours of your facilities to discuss the company’s operations and outlook. All this preparation and research will help form the valuation. You can discuss the various methods that were employed and the assumptions that were made to come to the ultimate conclusion.
Valuation is useful not only for transferring a business but as a tool to measure overall company performance. The final value depends on the methods used and the purpose for which the analysis is performed. Key stakeholders must accept it and withstand the scrutiny of the Internal Revenue Service.
