Having invested money in the company, the owners expect to receive it back in a considerable increase in case of its sale. But how to estimate the real value of a business? This article will answer this question.
Business valuation formula for your company: what is a purpose?
At any stage of the company’s development, an accurate expert assessment of the value of assets, the company’s value, and the brand’s value in the market are important. Business valuation is a set of actions of a specialist in determining the market value and commercial attractiveness of all company components: land resources, real estate, equipment and vehicles, stocks of manufactured goods, financial assets, and intangible assets. Business valuation can be carried out in a complex, for all its components, and for analyzing individual parts. In each case, business research features depend on the characteristic features of the firm or company being assessed. When conducting a business assessment, all aspects of doing business in this area are considered: macroeconomic indicators, industry specifics, accounting, legal and tax issues, nuances of financial activity, etc. In addition, an analysis of business performance, company development prospects, a study of profitability, and financial flows is carried out. Finally, the work of competitors and their impact on the state of affairs in the industry are also evaluated.
Evaluation activities are carried out in the following cases:
- during transactions related to the purchase or sale of a business, its part, securities, and other related assets;
- during the reorganization of the company, its merger or acquisition by external participants;
- for business insurance;
- when lending to a company.
Estimating the value of an enterprise, a holding structure, and a business as a whole is a complex task requiring a deep understanding of the situation and the ability to assess financial, legal, and tax risks correctly. Much depends on the professionalism of the one who will draw up the expert opinion. Often, an expert assessment of a business is carried out when making transactions for the sale or purchase of shares of enterprises. A professionally prepared report increases the confidence level in the business in question and can be requested by the bank when making a lending decision.
5 Best companies for business valuation
Qualified experts carry out a valuation of the company’s assets. Special preparation is required to draw up a competent and reasonable conclusion. When evaluating a business for sale or purchase, the auditors consider the company as a whole, as an asset that brings profit to shareholders over a certain time. Therefore, the professional is obliged to study “tons” of documentation. These are founding documents, financial statements for several years, auditors’ opinions, a detailed report on the company’s debts, if any, and many other papers.
Therefore, they need a secure data storage and sharing repository and a well-organized collaborative workspace. In this case, a virtual data room is the best alternative. It is a multifunctional platform that responds to all security standards of modern business. You can read data room software reviews here to learn about software functionality.
An independent consulting company with rich experience and a good reputation is a faithful assistant in the business evaluation process. So, we determined 5 of the best-known business valuation companies in the market:
- GCF Valuation
- Duff & Phelps.
These companies combine a comprehensive global approach with extensive industry experience and local knowledge to meet the complex needs of their clients.