When considering selling or buying a business, potential buyers and sellers may want to know the value of the business, that is, value.
In this kind of transaction, it is common for one party to pay cash and the other party to accept the shares of the enterprise. However, if there is no third-party evaluation, both parties may not know whether the transaction has obtained fair value. A fair evaluation will help negotiate a fair price and avoid unpleasant accidents after completion. Unfortunately, Many business owners underestimate the importance of this process and pay a price later. Poor corporate evaluation will bring high costs. It allows you to sell a company at a price lower than its value, or buy another company at a cost that has no room for future growth. A recent survey by the consulting firm Bend shows that 47% of the companies sold in the past two years have been incorrectly evaluated. Don’t be one of them! Read on to understand why business value is important when selling or buying a company.
Evaluating your business may be one of the biggest decisions in your life
Business evaluation is one of the biggest decisions you can make in your life. When you buy or sell a company, You are not only buying or selling the company’s assets. You are also trading their technology with employees. You are trading their relationships with customers. You are buying or selling the business rights of the company. All these factors will be included in the evaluation. For those who want to sell the project, the evaluation amount is a reasonable price for the business. This will help find buyers who want to pay. For those who want to buy a business, the evaluation can help find sellers who want to sell at a fair price.
Avoid unpleasant accidents
Business evaluation is a snapshot of the company’s analysis. It provides the current estimated value of your company. Business value will be based on many factors, including the current economic situation, so it can help avoid unpleasant accidents. If you are buying a company, You will know what to pay for it. If you are selling your business, you will know your business value.
Support reasonable price negotiation
The evaluation process will provide you with third-party opinions on business value. Business evaluation experts will observe your strengths and weaknesses from the outside and draw conclusions. Business evaluation also provides multiple values according to different schemes. For example, the worst evaluation result(minimum expected income) is 10 million rand; the best case(the highest expected return) will determine the value of 13 million won.
Please confirm whether your company is dead or more valuable.
There are many different exit strategies when selling a business. One is to sell the company “as is”, and the other is to sell the company “modified”. The difference between the two options is whether the company will remain unchanged after sale, or whether the company will become a new entity with new employees, new brands and/or new products or services. Value evaluation can help you determine whether your company is dead or alive. If your company is sold as a “dead company” and its value is higher, it is reasonable to sell your company as a dead company. If your company has higher value and is sold as a “living company” together with existing employees, customers and products, it is meaningful to sell your company as a living company.
Understanding the value of the company helps to make the right decisions for the company and its employees.
Understand the advantages and disadvantages of the enterprise through business evaluation. The value assessment will also show your potential value. Once you have this information, you can make better decisions that are beneficial to the company and its employees.
Small business owners have invested a lot of their own money to realize their dreams. The enterprise evaluation will provide various facts and figures for the business owners. These facts and figures refer to the actual value or value of the company to market competition, asset value and income value. In the process of spontaneously beginning to understand its value, owners can not only see the growth so far, but also provide themselves with a thoughtful decision-making roadmap. Here are five advantages of business value assessment:
- Contact more investors
When it is necessary to contact more investors to provide funds for the growth of the company, the business evaluation report is usually a prerequisite. Investors not only want to see the current value, but also want to see a comprehensive value forecast. If investors can fully understand their capital flows and how to provide them with wise investment returns, they are likely to consider the proposal more seriously. By deeply understanding their current business value, enterprise owners can assess where the greatest value comes from. This will stimulate the interest of potential investors and provide the company with opportunities for further development.
- Increase business value through intelligent decision making
The evaluation at the basic level will highlight the value of the enterprise. Understanding the factors that have the most positive impact on outcomes will provide business owners with a perspective on how to improve overall value.
- Sales value
Selling a person’s business is usually only once in a lifetime, but it is important to remember this from the beginning. In order to run their own businesses, business owners can invest for years or even decades, so they should get the best “return” when they need to transfer. The evaluation process started before the company went public. The advance understanding of enterprise value is the most positive factor for enterprises to invest in the growth of enterprise value, providing a strategic time to achieve high sales prices. Business assessment helps to maintain business operations and provides information on the best overall exit strategy.
- Understand the position of business in the industry
The enterprise evaluation will accurately describe a person’s position in the entire industry sector. Using intuitive public data points, the valuation price is based on previous market value prices or sales of similar company types that have recently been sold or publicly traded. This will enable business owners to see their progress across the country, thereby providing them with opportunities to develop strategies and invest in their financial portfolios in the best way possible to develop their business.
- Realizing true enterprise value
Enterprise owners generally have a general understanding of their enterprise value based on simple financial combination elements(i.e. total asset value, company bank account balance, etc.). However, although these factors are important, they cannot describe the overall value of the enterprise. Enterprise evaluation depends on multiple factors, each of which can affect the growth or decline of value independently. It can also help to display the company’s revenue and evaluation data. Understanding the true value of an enterprise is often a decisive factor in determining whether selling is the best choice for the owner.
