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A business valuation is simply an assessment of a business’ monetary value. This takes your company’s management structure, market value, a company’s assets and liabilities and other important factors into consideration in order to give a fair assessment of your company’s business.
Selling your business is one of the most important decisions you are likely to make in your life. As such, it is crucial to be as informed as possible, to ensure that the process is smooth and successful.
There are nuanced differences between how much a business is mathematically worth (“value”), and what a willing buyer and seller are prepared to agree upon (“price”). Therefore, obtaining a sound valuation of the business is vital to avoid complications and can support the sale process in several ways. Our valuation experts can give you an accurate and fair assessment of your company’s value. You can get in touch here or call us on 01223 728222 to get your business valuation started as soon as possible.
It is likely that if you are considering selling your business, you will already have an idea of the price you would like to achieve. However, it is important to consider whether this figure is reasonable and realistic to your company’s operations.
If you set your expectations too high, you may be unable to find a customer that’s willing to meet your price, resulting in a waste of time, energy and fees. Or, if the valuation is below what you expected, it may be useful to pause and assess whether you’d like to continue with the process of selling your business.
By having an external third party perform your valuation, you can compare your original thoughts on price with the valuation, effectively “sense checking” your expectations. This moment of reflection can be advantageous in assessing whether to proceed with a transaction before any further costs are incurred or time is committed.
Further down, we go more into why a business valuation can be valuable even if you’ve decided against selling your business. For example, a business valuation can form a basis for business decisions going forward. Looking for expert business valuation services?
If you are certain you still want to sell your business, then the next area that a business valuation can help is with an initial assessment of offers received. Valuations can help screen out buyers who have put an offer in that is far below the value of the business. This may happen when a buyer hopes that you want a quick sale and they can obtain a great business at a discounted price.
However, a well-managed sales process should result in multiple competitive offers being on the table. After removing lowball or insufficient offers, you can assess the remaining buyers’ attitudes by their approaches to calculating their offers using your valuation as a benchmark. This allows you to concentrate on more reasonable offers, saving time and increasing the efficiency of the sale process
In many cases, and certainly for owner-managed businesses, you are likely to only be involved in one business sale transaction in your life. Often your prospective buyers could have acquired several businesses and may be vastly more experienced in the process.
A proper business valuation can help level the playing field, giving you crucial information and experience in the transaction process, ensuring you receive the consideration you deserve for the business that you have nurtured.
Once the lower offers are removed from consideration, the next way that a valuation can help when selling a business is in the negotiation process. Of course, the actual amount a buyer ends up paying will differ from your business’ assessed value, but it provides a good benchmark for starting negotiations.
Understanding how a buyer will likely assess the underlying value of a business will help in agreeing a price that is more favourable to you as the seller. That is especially the case if you have previously performed a business valuation and can prove your business is growing in value.
Having your business valuation performed by an external third party can be incredibly useful when making the decision to sell your business. At PEM, we can help provide a “sense check” of your expectations, act as a screening tool for offers for the business, or offer a useful starting point for negotiations.So, if you are looking to sell your business or would just like to know how much it is worth, please get in contact with our valuation experts to obtain a professional, accurate value for your business. Call us on 01223 728222 or get in touch here.
At PEM, our valuators may use various different methods to assess your business’ true value depending on the size, operations and other factors that may be out of your control. Here are just a few of the methods we use:
Whether you’re selling your business or setting up for a merger with another company, our experts are here to help. Navigating the mergers and acquisition process is always a complicated process, so having a qualified voice in your corner can be crucial.
If you feel ready, get in touch with our business valuators using our contact form here or by calling us on 01223 728222. We’ll be happy to give you a fair and realistic account of your company’s value.