Business Valuations
PURPOSES OF BUSINESS VALUATION
Business valuations can be performed for a number of different reasons. Here are the most common:
- Buy or sell due to retirement, illness, unhappiness, boredom or un-profitability, etc.
- Divorce or Property Settlement
- Death, Insurance, Estate and Gift Tax Purposes
- Financial Considerations or Requirements: bank loans, loan collateral, taking a company public, etc.
- Merger, Acquisition or Consolidation of a Business
- Dissenting Shareholder or Minority Shareholder Buy out
- Shareholders Buy and Sell Agreements
- E.S.O.P.'s (Employee Stock Option Plans)
Why Should A Business Owner Consider An Independent Business Valuation?
In today market, many business owners still leave substantial money on the table when they sell their companies – most often because they do not truly have a handle on their company’s value. For that reason, the valuation process is a true asset to the business owner and a thorough, professionally prepared valuation will assist them in:
- Helping identify the key value drivers, major strengths, and more importantly, the major weaknesses of a company allowing the owner to solve both obvious and hidden problems prior to the selling process.
- Determining a reasonable selling price. Many owners rely on general rules of thumb, casual advice from friends, or other similarly unreliable sources. Values determined by general multiples or rules of thumb may be too high or too low. Unless the business owner goes through the valuation process, he just will not know. If the owner’s expectation of value is too high, it will prolong the selling process until a price concession is made. If the price is too low, money is left on the table.
- Fully understanding the value of the business will assist during negotiation. In this market, one can expect buyers to be sophisticated and experienced. They will conduct a rigorous analysis of the company even if the seller has not. They will look at those factors and value drivers that the owner and his advisors should consider in valuing the company, and they will use that information against the seller in negotiations if allowed.
Whether you need a "Business Value Analysis" or a "Full Third Party Valuation" contact The Business Exchange for a free confidential review.
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