A business can only be successful if it has a firm foundation of business valuation, and there is no second thought about this fact. But how to draft a successful business valuation plan that yields a successful business is a big question. The two important points to begin with business valuation are:
a) Ascertain as to why you need business valuation and,
b) Accumulation of important information, which will help you to prepare and assess your business worth.
But what is this business valuation in the first place? It is a process of estimating value of a business or determining the current worth of a business. Not as simple though as it may appear. Because the basic hurdle in the business valuation is setting a value to each and every asset of the business, which includes tangibles as well as intangibles; as in the how much is the goodwill of the business worth or brand logo worth or say a certification or registered trademark of the business or even the client list worth. So you get it? Its no simple job at all.
Most commonly business valuation is a terminology used while selling or purchasing a business rather it is method of determining the worth or value a business. Let us see how a successful business valuation plan ensures a successful business.
Selling a business is not an easy task; it requires planning, teamwork and executing the drafted plan to perfection to obtain maximum gain while exiting the business. And hiring a business broker service will help you vastly in this regard who will have the expertise and experience to evaluate your business to perfection and fetch you the right market value from the buyer.
The basic approach by any broker or the owner of business is the asset based approach wherein the net balance sheet of the business consists of the assets and the liabilities are subtracted.
The other method to value a business is the liquidation approach ascertains the net value of the assets and pays up the liabilities.
The earning value factor is determined on the basis of the business’ future growth in terms of wealth rather its potential to yield gains/profits in the future i.e., after the business is sold.
Using the market value approach is another means to value a business, where in your business’ worth is calculated while comparing it with similar businesses in the market based on which the value/worth is decided.
The most common business valuation methods is the earning value approach but a combination of the above mentioned approaches will help establish a successful business valuation planning, which in turn leads to successful business.