Why Get Your Company Valuation Done Even If You Are Not Going For Funding In Near Future?

November 28, 2016

You may want to know what your business is worth today, based on the growing market or does your company look like a beautiful looking, well structured, nice color matched Bungalow? And maybe you want to reconstruct it; to make it bigger and a superlative edifice.
Company valuation is based on your asset values and future earning abilities, which you may develop and lead to future success, which also may or may not materialize.

It is very imperative to assess business valuation to get to know that whether you have significant asset or liability. Mostly, true valuation of business occurs only when business owners sell the business. However, there are four basic methods of business valuation such as Asset Based valuation, Earnings Based, Market based, and Cash-Flow based. There is a common step which comes under all the methods, compilation of relevant and accurate financial information of the company.

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In simple language, business valuation is a set of simple steps used to determine the value of the business or market value of the organization.

Not just for FUNDING, you need business valuation if ……..

You’re taking over ownership of a business, or are planning to buy into a privately held business.
You’re planning on conducting a stock or asset sale for your business.
You’re establishing an ESOP, or your company currently maintains one.
You want to fairly terminate a business partnership.
You’re planning to give a share in your business as a gift.
You are taking your company public.

Consider the benefits of having a professional, independent appraisal by a specialist in the field of business valuation.

Some of the business situations which may call for a formal company valuation which is beyond Funding needs which include:

1. Mergers & Acquisitions

Selling or buying a company is likely the most important decision a business executive may ever make. Setting a fair price, including structuring payment terms to meet the needs of both parties, is necessary for a successful transaction.

2. Litigation

An objective appraisal can be invaluable in helping to reach a pretrial settlement. If the matter goes to trial, expert testimony can greatly strengthen a case where the value of a business interest is an issue before a court or arbitration panel.

3. Estate Planning

It is important to have an accurate value for a business interest to adequately fund a future estate tax liability.

4. Partnership dissolution

When one partner wants to sell, it is often necessary to have an independent appraiser value the interest to arrive at a fair settlement.

5. Divorces

When the parties have an interest in a privately held business, the fair market value of the holdings must be established for an equitable division of assets. Often, expert testimony is required if a settlement cannot be reached. In some cases a single appraiser may be retained jointly by the parties.

6. Compensatory damages

Expert appraisal of damages is necessary in cases where lost profits or diminished business value is an issue. Typical examples include breach of contract, fire, and antitrust violations.

7. Stock options

Establishing the fair market value of stock options to be issued to employees, particularly in a new company, can be crucial to attracting and keeping qualified, motivated employees.

8. Going private

When a liquid market never develops for a publicly traded stock, the controlling shareholders may want to eliminate reporting requirements and expense. By law, a fair price must be offered to the minority stockholders.

9. Sell/Buy Agreements

To avoid a potential problem, it is often desirable to have a buy/sell agreement in effect between the principals of a privately held business. Each type of business is subject to different valuation parameters and it is important that the contractual price is fair to all concerned parties.

10. Recapitalization

In this method of reorganizing a corporate capital structure, not only must the total value of the company be appraised, the value must also be allocated between the various equity interests before and after the recapitalization.

A business valuation is a complex financial analysis that should be undertaken by a qualified valuation professional service provider. Business owners who seek a low cost business valuation are seriously missing out on the important benefits received from a comprehensive valuation analysis and valuation report performed by a certified valuation expert.

These benefits help business owners negotiate a strategic sale of their business, minimize the financial risk of a business owner in a litigation matter, minimize the potential tax that a business owner or estate may pay in gift or estate tax situation as well as provide defense in an audit situation.

Final Thoughts

Business valuation is a combination of art and science, which focus on the current value or worth of the business after analyzing other related factors. It is a complete educated guess to provide worth of the company or business to the owners for several purposes whether for selling or only determining the asset and liability. There are several websites who offer services of expert business valuation service. One of the expert service provider is Anmol Sekhri Consultants Pvt Ltd.

Anmol Sekhri is an approved VALUER and a CHARTERED ENGINEER registered with the Government. Founded by Mr. Anmol Sekhri, is an organisation offering business valuation services. They are a multi-faceted organisation who have been in the industry for years. They have carried out assignments in several industries. Their range of clientele varies from the SME sector to the large corporate houses and MNC’s. Such wide exposure is made possible with the help of a multifunctional team of experienced Engineers, Chartered Accountants, MBAs and Management professionals.