Do you have your own start up? There are a lot of them in the United States. The country is home to more than 26.5 million businesses. Nearly 5.4 million of these companies have employees working for them. Most American companies have fewer than 500 employees, these companies account for about 99.7% of all American companies. The time may come where you need to find out how much your business is worth. Unlike other measurements and assessments, the business valuation a company has is very much dependent on the reasons your are looking for it.
The reasons business valuations are different from other measurements is simple. If you are looking for investors, you may want to highlight some aspects of it potential whereas you may want to showcase other features if you are looking to sell. Because of this, there are different ways to go about acquiring accurate small business valuations.
- Tips for obtaining an accurate business valuation report:
Talk to experts from business valuation firms. Talk to a few different small business valuation services companies and work with them so they can give you feedback on your company and the process you are using to find your business valuation. Talk to experts in accounting and corporate finance. See what they think of your business.
- You do not need to have a formal business valuation done for your company. While there are a lot of companies out there who offer these to companies like yours, it is not worth the money. You can make your own assessment of your business. The only time getting formal business evaluations really makes much sense is the cases where a family business is being sold off to the shareholders.
- Research your industry and market. How fragile is it? How much growth can be realistically expected? Some industries are clearly what investors would be concerned “sexy.” You should know a decent amount about your industry, otherwise you would not have a company that operates in this sector. You need to learn more for when you talk to investors. Look at what your competition is doing. Try to do an objective assessment of their management teams, where the market is and where it is going and anything else that might have an impact on your business. You may want to to a SWOT (strengths, weaknesses, opportunities and threats) assessment of your business and your industry.
- Look to other companies that are similar. How do you compare to other companies in your sector and industry? When you are starting the process of preparing your business valuation, looking at companies that are similar to yours is always a good starting point. If any of them have recently been sold they are the perfect ones to look at.
- Consider the different approaches to the business valuation process. You may want to apply a few to your business and see which works the best for your needs. It cannot be stressed enough how while facts and figures play an important role in the business valuation process, this is ultimately a very subjective process. You can look at your earnings after taxes or your earnings before interest and tax. You can apply the asset based method. When you talk to the small business valuations firms, they can go over each approach and how you should apply it.
- Leave you emotion out of it. If you worked hard to build a business from the ground up, you may think that this is an impossible thing to ask of you. You have put your blood, sweat and tears so that the idea of being objective when you are looking to do a proper business valuation of your company. You have to do all that you can to be as objective as possible. You need to look beyond what you had dreamed your business would become and look only at what it is. If you work at it, you will be able to take accurate stock of where your business is. Being realistic and objective will help you get the right result.
If you work at it, you can get the right business valuation for your business.