Valuing a business can be tricky and to get an accurate valuation there are plenty of things to think about and take into consideration. Thankfully, it’s not complicated and even if you are unsure of the steps to take there are plenty of industry professionals out there who can help you. Below a few of the steps needed to help you decide when the time is right to value your business.
Have a business plan
If you’ve been running a successful business, then you should have created a business plan. This plan clearly outlines how you are going to meet all your short- and long-term goals that are going to help you hit those financial targets. It might seem obvious, but you would be surprised as to how many business owners go in without one and then wonder why their business isn’t making money? Having a business plan will show potential buyers and investors how profitable it can be.
Look at your finances
The last thing you want is for prospective buyers and investors to see a poor record of how you keep your business finances. Doing so will result in a poor valuation. Before you even think about putting your business up for a valuation check that you have all the necessary tax returns, credit reports and purchase records in a safe, easy-to-reach place could help make the process of valuing your business that bit easier.
Reduce the risk
Investing or purchasing any business can be risky so in order to reduce this and protect you against accidents that could bring the business to a complete halt look at types of business insurance that can help alleviate any risk. Also, it is a good idea to expand your network of customers and clients you work with, if you rely on a dedicated number of customers any issues could put an end to that relationship.
While you want to make as much money from the sale of your business you need to be careful that you don’t overestimate its value. You will obviously be proud of what you have created but overestimating the value of your business may put potential buyers and investors off. Taking advice from business consultants can be a great way of getting a fair valuation – they will also highlight areas for improvement.
Business is all about the art of negotiation and to get the best valuation for your business you are going to have to use your negotiating skills. It is important to factor all of your assets into the final valuation, for example, if you have built good working relationships with suppliers and customers and you have a dedicated workforce this is all worth highlighting to your potential buyers and investors.
Professional advice Working to value your business is a huge task and with so much to think about it can be hard to get bogged down by it all. Seeking professional advice is a great way to reduce the stress, you might want to hire an accountant to run over the finances with you or a business consultant to look at other areas of the business you may have overlooked.