Usually, the average business owner has a good idea of their personal asset base, whether that’s a guide understanding of the value of their property, or vehicle, as it is easy to benchmark open market data. However, this may not always be the case for an evolving and changing business.
As corporate finance advisers at PM+M, we are often asked to provide valuation reports for our clients, providing a realistic snapshot of the business’ worth at a particular point in time.
What are the benefits of a business valuation?
- Facilitates strategic planning and decision-making
A clear understanding of your business’s worth helps in formulating strategic plans. An accurate valuation provides a comprehensive picture of your company’s financial health, assets, and insights which are vital for making informed decisions about expansions, diversifications, potential downsizing or even whether to sell the business.
- Enhances negotiation leverage
Whether you’re seeking investment, considering a merger, or contemplating a sale, having a clear understanding of your business’s value could give you a significant advantage in negotiations. Having realistic valuation data mean you can set expectations accordingly, avoid undervaluation, and negotiate from a position of relative strength and knowledge.
- Attracts investors and secures funding
Investors and lenders may be more favourable to businesses that demonstrate clear financial understanding and stability. A well-documented valuation can offer reassurance of the viability and profitability of their potential investment.
- Essential for tax and compliance purposes
Business valuations are essential for tax reporting and compliance when an event occurs, and can help ensure that you comply with tax regulations, particularly in scenarios involving business restructuring, estate planning, or shareholder disputes.
- Guides succession planning
For family-owned businesses, or those with long-term succession plans, valuations play a key role as they help in structuring fair and equitable transfer of ownership, ensuring that successors inherit a financially stable and accurately valued entity.
- Improves performance measurement
A business valuation is not a one-time activity but a continuous process that helps in measuring performance over time. By comparing current valuations with past ones, you can gauge the effectiveness of your business strategies, financial management, and overall performance. It serves as a benchmark for setting future goals and tracking progress.
- Play a role in various legal/financial scenarios
From inheritance and probate to divorce and minority share sales, plus many other scenarios, valuations can play an important role in determining the fair market value of assets – ensuring accurate and equitable distribution.
Get in touch
We understand the effort and dedication you’ve invested in building your business, therefore understanding its value is crucial for making informed, objective decisions which are free from emotional bias.
That’s where we can help. Accurate valuations ensure that you neither overestimate nor underestimate your business, which is vital for strategic planning, negotiations, and securing investments. Speak to our experienced corporate finance team to find out more about valuing your business by emailing enquiries@pmm.co.uk or calling 01254 679131.
