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3 REASONS TO CONDUCT A BUSINESS EVALUATION


Every business at some point faces a situation where it must make a huge decision for itself. These crucial life-changing decisions of businesses require one thing in common and that is its valuation. A business's valuation will give you, your investors and potential buyers a good idea of what your business’s value is by looking at both tangible and intangible assets. It is not just a number but in fact, is a stamp that determines how worthy the stakeholders think your business is of their money. It's always good to stay prepared by conducting a business valuation at least once per year.
The following are a few business valuation methods used by businesses to determine their worth.
⦁    Asset Business Valuation (Focuses on a company's net asset value)
⦁    Market Business Valuation (Focuses on the business's market value)
⦁    Earnings Business Valuation (Focuses on the business's earning)
⦁    Discounted Cash Flow (Focuses on a company's future earnings)

Here are the 3 most important reasons to conduct a business valuation for your company: -
⦁    DETERMINING COMPANY'S RESALE VALUE
Selling off a business can be a heartbreaking moment for the owners, yet more often than not it is the best choice to make.
While selling a business everyone expects the best deal possible but to know what it is, it is important to know how much the business is truly worth and business valuation provides the sellers with just that. With a strong genuine business evaluation report, negotiations become very easy, since both the parties understand the reasoning behind the price that has been quoted.
In the event of announcing that the business is up for sale, the company should conduct the valuation well in advance, preferably a year prior to the announcement. This gives the business the required time to make certain changes in the business which will improve the business which in turn will enable the partners to raise the price and get more out of the sale.
⦁    DETERMINE VALUE FOR MERGERS/ACQUISITIONS
Since the day of its formation every company dreams to go big and one of the popular ways to make that happen is to be a part of a big enterprise or merge with one. Mergers and acquisition bring a lot of benefits to the business, but it could also result in a disaster for the owner of the business if the valuation is not done properly. Undervaluing of a business can lead to a loss during the deal. Which is why instead of regretting later businesses spend a lot of time and money on the valuation of the business.
⦁    DETERMINE VALUE TO GET INVESTORS
Whether the goal is to grow or to sustain, almost every company reaches a state where it needs external financial aid to achieve its goals. A popular solution to this problem is to get investors by selling equity. But to sell equity to a potential investor it is essential that the company knows exactly how much its worth and that's where business valuation comes in. It does not just tell you the cost per share but also gives you additional arguments that will help you quote a higher price and get the most out of the deal.           


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