Gathering money, applying for loans and every other financing event in a small business requires a lot of effort. Like any small business owner, you would not want your hard work and investment to go to waste because of a few rookie mistakes. One of the best ways to ensure your business is heading the right way is by calculating your business’ value.
A proper valuation of a business tells about its financial future and success. Even if you are not planning on selling your business anytime soon, it might still help when applying for a loan or seeking an investor. Hire a business valuation consultant today.
Business valuation tips for small businesses
- Organize your finances.
- Organizing finances for a business can be complicated, even for small organizations. You might want to consult a professional financial advisor or a broker specializing in valuation to avoid mistakes. However, if you want to do it on your own, it is certainly possible to do so. Before even considering evaluating your business, you must understand your financial information and get it in order.
Make sure you have the following information:
- Profit and loss statements
- Tax filings and returns
- Licenses, deeds, and any proprietary documents
- Short overview of your business finances
- Make a stock list of your assets.
If you think you cannot actually determine your business’s actual value and arrive at an exact number, you might be wrong. Sure, the process may seem a bit tedious and even impossible to some. However, it is certainly possible to do it all on your own. You have to be very careful.
First of all, make a list of all of your business assets. This may include assets, liabilities, cash, investments, intellectual property, and even employees. You can also use this information later to sell to potential buyers. Business assets are anything that adds value to your organization.
There are two types of business assets: tangible and intangible. Tangible assets may include the following:
- Inventory or stock
- Real estate or property
- Cash on hand
- Equipment or means of production
Intangible may include:
- Intellectual property, such as patents, trademarks, and copyrights.
- Brand and reputation
- Customer loyalty
- Research your industry.
When selling a business, having a good understanding of your specific industry is highly crucial. Understanding the industry’s trends will help you reach an accurate valuation. Researching may include learning about your competition, which will also show you your growth potential in the market. Then, you can use this information to demonstrate to buyers what makes your company stand out.
