Are you aware of how much your business is worth, or is your valuation a general estimate? Knowing the accurate value of your business is important for various reasons, but it is especially important when you are seeking investors or considering selling your business. Hiring a business valuation firm or business appraiser is a great way to put a number to your company. An appraiser will determine the value of stock, buildings, equipment, and intangible assets such as brand, good-will, and intellectual property.
According to IBISWorld, when valuing a business, appraisers can assign a value to your assists, anticipated cash flows, owner’s benefit, and market. Entrepreneur offers some proactive tips for business owners to make their company attractive to potential investors and get the most value if they decide to sell:
- Increase your Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) – To boost gross margins and profits, diversify products and customers, and hold costs down.
- Install Solid Managers – The strength of your management team is one of the most important factors to investors. If a business is overly reliant on the owner, it has the potential to sink when the owner exits. If you are interested in selling, make sure you start removing yourself from the daily operations and focus more on business development and increasing your EBITDA.
- Conduct Audits – if you are interested in selling, plan to have at least three years of audited financial statements available.
- Document Your Processes – It is important to document every detail and process of your business, so that the investor has an understanding of what it takes to operate it. This will make your business appear stronger and more stable, decreasing the risk of investment.
Referrals from other company owners that have used an appraiser are one option to selecting a business valuation firm. You can also check the member directories of professional associations such as the American Society of Appraisers, the Institute of Business Appraisers, and the National Association of Certified Valuators and Analysts. Need a low cost alternative, consider using a business valuation software solution.
If you need help deciding what approach is best for you, contact us.