Whether you’re operating a small venture or a well-established enterprise, enlisting business evaluation services is a must if you want to establish the value of your company. It’s crucial to determine the value of your venture in case you want to secure a loan for expansion, you’ve found new investors or shareholders you would like to add, are exploring your exit options and you need to sell it, wish to merge with another bigger or smaller company, are filing for divorce, or want to pay your taxes.
Whatever your reasons are, performing a business evaluation is a massive challenge even for the most experienced finance experts. However, by taking these evaluation approaches, you can calculate the real value of your company in a few simple steps. Here are FIVE top strategies to consider:
Market Value Strategy
It seeks to establish the value of your venture by comparing it to similar businesses sold successfully in recent times. However, for this strategy to work, you have to carry out extensive research to find comparable ventures with known purchasing value. This approach is equivalent to using real estate comparable to value a building.
This is one of the easiest ways of calculating a business’s worth. It involves looking at a company’s balance sheets and listing all assets before subtracting all liabilities. The resulting difference is the estimated value of the company.
It evaluates the business’s profit against the ROI, to establish what an investor stands to gain by investing in a business. The method is ideal if you intend to add more shareholders/partners or wish to attract investors for equity financing.
Conversion of Income or Earnings Strategies
If your business is stable and has a constant flow of cash, then consider applying the capitalization of earnings method. This method calculates the real value of a venture based on cash flow, annual ROI, and expected value, assuming current earnings will continue into the future.
Book Value Strategy
It determines the value of a company based on its balance sheet at a given time. This method is similar to the asset-based approach, but in this case, it uses the company’s balance sheet as at that particular moment rather than through the financial year.
If you want to determine the value of your business, do not hesitate to hire a professional market research company. They would have the experience and expertise and will use the latest valuation strategies required to carry out a comprehensive study.