Business Valuations for Buying, Selling and Planning
Whether you’re trying to acquire a company, raise capital, or plan for your eventual exit, a business valuation will help you understand of where you’re at, where you're headed and what your options are.
Hypothetical scenarios that require a business appraisal:
A high-net-worth individual or company is trying to acquire a business, and needs to gain the confidence and approval from lenders, investors and board members. A business valuation would substantiate the offering price for a company.
A business owner is considering selling his/her business within the next two to three years. A business appraisal would determine the company's value today, but also help the owner understand how he/she can increase its value over the next few years.
Much of a business owner's wealth is tied up in his or her business. The owner is worried about this lack of diversification and would like to explore options to diversify their wealth. Selling a minority interest of the company's stock to a key manager or outside investor would facilitiate this goal. A business valuation would allow the parties involved to feel that the transaction is fair.
Understanding your company's value is a key component in all stages of business ownership:
Buying or selling a business: This is the beginning and the end of the business life cycle. An independent valuation gives confidence to the parties involved.
Raising Capital: Additional capital may come from existing investors or new investors. A business valuation helps you understand the amount of equity new investors should receive for their investment.
Increasing Value: A business valuation will help you understand your company's current value, as well as identify areas to focus to increase its value.
Diversification: An inevitable concern for successful business owners is that too much of their wealth is tied up in a single asset, their company. Although they may not necessarily be ready to sell, it may be wise to shift wealth outside of the company into other investments.
Exit Planning: A business valuation helps owners expect a range of value if they decide to sell. Valuations also uncover problems that might "derail" a future transaction. By closely evaluating the company beforehand, you can anticipate potential issues that would concern a buyer, and therefore allow time for correction or at least early disclosure.
Documents required to complete an appraisal:
Profit and loss and balance sheet statements for the last three to five years
Interim profit and loss and balance sheet statements for the current year
Federal income tax returns for the last three to five years
