You are here: Home » Small business » Company insurance – life » Business valuation

Business valuation

A financial planner would ask a small business owner two important questions when valuing your business:

How much is your business worth? How can you make it more valuable?

What is business valuation?

Business valuation is a process and a set of procedures used to estimate the economic value of the owner’s interest in a business.  A business valuation is used to determine the price financial market participants would be willing to pay or receive to complete a sale of a business.

As well as estimating the selling price of a business, the same valuation tools can often used to resolve disputes relating to divorce litigation, estate planning and gift taxation, and many other business and legal purposes.

What are the benefits of getting a business valuation?

  • Initially a business valuation may be performed simply for information purposes, perhaps when planning an exit route from the business.  When the time for sale arrives, owners need a starting point for negotiations with a prospective buyer and a valuation will be needed
  • With a business valuation it can help you buy or sell shares in your business at a fair price
  • When your business needs to raise equity capital a valuation will help you agree a price for the new shares being issued
  • Share valuations may be required to determine the value in order to provide shareholder protection insurance
  • If you value your business regularly it can help provide measurements for management performance and help them focus on important issues and possible areas which need to be changed

What do I need to look out for if I obtain a business valuation?

It is worth analysing the value of your company from a liquidation perspective as well.  This is a view favoured by regulators who will look at the interests of deposit holders as opposed to the interests of either creditors (debt) or shareholders (equity).  The value of a company from this viewpoint is measured by how much of their money deposit holders can expect to get back if the company is liquidated right now.

Any questions on business valuation?

If you have any questions, please call us on 01582 839280 or Email us.