If you’re meticulous about financial reporting, you may already have an idea of your firm’s value, but in other cases, a formal business valuation may be necessary, such as:
• Various transactions: Are you in the market to sell your business? Are you considering an initial public offering? Do you need financing?
• Tax purposes: estate planning, stock option distribution, and S Corporation conversions are all examples of this.
• Litigation: This is often required in bankruptcy, divorce, and damage assessment proceedings.
While there is no universally acknowledged method for business valuation, there are widely accepted indicators that will provide you with a realistic appraisal of your company’s value. Three strategies to help you provide a more realistic appraisal for your business:
1. Conduct an in-depth examination of your business’s operations
Is it structured in the most tax-efficient manner possible? Have sales been slow, or do you sell the majority of your products to a small number of customers? If this is the case, consider bringing in an expert consultant to assist you.
Do you have a number of goods that are underperforming? Perhaps it is time to de-inventory them. Redesign your catalog to give it a new appearance, and make an effort to communicate any new and interesting product lines to your current consumer base.
Additionally, it may be time to spring clean your physical properties. Even modest modifications, such as a fresh coat of paint, can boost the value of your company.
2. Physical and Intangible Assets
Bear in mind that company valuation is not only a mathematical exercise in which your obligations are subtracted from your assets. Additionally, it is calculated using the value of your intangible assets.
It’s simple to calculate the value of your physical estate and furnishings, but what about your intellectual property? Are you a patent or trademark holder? And what about your business ties or the reputation you’ve built with current customers and members of your community? Don’t forget about long-term workers whose in-depth knowledge of your firm contributes to its value.
3. Pick Your Appraisal Team Wisely
Make no attempt to accomplish it on your own by consulting the Internet or reading a few books. While you may ultimately need to consult with professionals such as a company broker and an attorney, your first step should be to contact an experienced tax professional who has the skills necessary to arrive at a reasonable business value.
If you need a company valuation for any reason, please contact us to talk with a tax and accounting specialist who can assist you.