In an economy where every dollar is measured and stretched to its breaking point, understanding the value of your business is critical. Experian's Business Valuation Reports help business owners and entrepreneurs answer the most important questions facing their business.
The truth is that there is an awful lot that could happen to your business, whether you are a start-up or a well established operation that is ready to catapult your business to new heights.
Having a reliable estimate of the value of your business puts you in a strong negotiating position in any of these situations. Business Valuation Reports will arm you with the market knowledge and information required to make the right decisions regarding the future of your business.
Many homeowners know the current value of their homes and even their cars but, do you know the value of your business? If you are like 75 percent of American business owners, you probably don't, and that could lead to poor decision making and even loss of value or money for you and your family.
Owning a business can be similar to owning stocks or commodities. To evaluate the price of a stock or commodity, you must understand the underlying value. Your business works in the same way. In essence, business valuation is a process and a set of standards used to estimate the economic value of an ownership interest in a business.
Business valuations are required in the case of shareholder disputes, divorce, mergers and acquisitions, financing and in the event you decide to take your business public. The greatest possible impact on your business could occur if you are looking to sell a business in the next 10 years. Not having an accurate and timely estimate of value could cost you millions.
Moreover, a business valuation will give you, your investors and potential buyers a good understanding of both tangible assets–like real estate and cash–as well as intangible assets–like intellectual property and the comparable metrics associated with your industry category or peer group.
In a typical business valuation, accountants and lawyers provide the book value, which is based on the business's financial statements. If your business is unique, so too are its structure and value; for example, your cash flow may be strong, but your earnings may be below the industry average. This value does not always reflect the true value of your business. This way of providing a valuation takes an average of three weeks and could cost as much as $8,000, as estimated by IBIS in 20121
It's also worth considering that book value may not capture a number of factors, such as competition, market and industry growth, business expansion opportunities, changes in technology and much more. It may also not include your valuable intangible assets, such as a loyal customer base or patents.
The bottom line is, you need to understand the difference between how accountants and lawyers may value your business and how a potential buyer might do so.
1IBIS World Report OD4797