I Think I Need a Business Valuation
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Determining the value of a business is a critical step when a business owner is considering selling, gifting, obtaining financing, acquiring new investors, or settling shareholder disputes. Before hiring a business valuation professional, there are certain things every business owner should know.
It is crucial to have a clear understanding of the purpose for your valuation and the interest to be valued. The value of a 100% interest in your company can vary considerably from the value of a small, minority interest. It shouldn’t be assumed that the minority interest value can simply be obtained by multiplying the percentage of that interest by the value of the whole. You must also remember a previous valuation may not be indicative of the current value of your company. Valuations are estimates based on a number of assumptions and factors that can change drastically over a short period of time.
It is essential to select the right valuation provider. Business valuations require specialized knowledge and expertise, and you want to work with a professional who has the relevant experience and a track record of providing accurate and reliable valuations. Experts with designations such as Accredited Senior Appraiser (ASA), Accredited in Business Valuation (ABV) or Certified Valuation Analyst (CVA) are all certified by accredited organizations in the industry.
Be prepared to provide access to detailed financial records including audits, tax returns, budgets, operating and buy-sell agreements, and various other records that may be requested. Valuation professionals will generally conduct a management interview and may also perform a site visit.
Valuations are a fundamental process during the life of a business and provide key feedback to business owners. No different than knowing your starting point on a roadmap, it is imperative to know where you are today to plan and make decisions on where you and your company want to be in the future.