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Your business is important to you. You pour blood, sweat and tears into your vision to ensure it’s more than just a dream — marketing it on a daily basis, seeking out cost-saving measures, crafting a supportive work environment for your employees. Simply put? Owning and running a business really is a lot of work. How do you determine whether or not you’re getting anywhere? This is where business valuation services comes in. A business valuation analysis takes a hard look at your figures and compares them to the competition, gauging its growth, its weak points and, overall, providing you a full picture of your efforts.
By the time you’re finished reading, you’ll be wondering what a business valuation report could be telling you about all your hard work.
The United States has been undergoing a major shift in its workforce. Small businesses are cropping up more and more thanks to the flexibility of technology and local start-ups and freelance work is growing more preferred. It’s estimated there are over 20 million American firms without employees. Money is tight for everyone and, for what will last for years to come, people are trying to find the best balance between smarts and dedication.
What is business valuation? Simply put — it’s an economic analysis exercise. It’s how you piece together the puzzle of all your little efforts and form a larger picture of where your brand stands compared to others. There are many tools you can seek out to do the most accurate possible business valuation, too. You can apply for business valuation services and put your company under the eye of a trained professional. You can use a business valuation calculator designed to pull apart business figures. The list goes on.
Let’s walk you through the basics. The two primary financial statements you need for a business valuation to be successful are your income statement as well as your balance sheet. To do a proper job of valuing a small business, specifically, you need to have three to five years of historic income statements as well as balance sheets available. Determining the value of your business with three approaches will round out the set-up — compare to recent sales of similar businesses, look at the earning power and risk assessment and, lastly, check off the company assets.
If you run an independent cafe, look at other local cafes of a similar size and approach and see how they’re doing. If you’re thinking of expanding your lawn maintenance business and you want to know how far you should go, look at similar businesses of the size you’re interested in and check out their progress. There’s nothing wrong with a little comparing and contrasting, especially in industries that are known for being ruthlessly competitive at the best of times.
You may be surprised about your valuation results and how they are mostly influenced by your need for such a service. After all, people who feel like they’re progressing smoothly might not see the urgency for a valuation income approach! Remember, however, that business value is never absolute. It fluctuates and changes year after year. You use business valuation services to estimate how your business is doing on a regular enough basis to better prepare you for anything new that may arise when you least expect.
Whether your apply for business valuation services or want to give it a try yourself with a small business valuation software, you’re already on the right track.