Most businesses and companies are all as different as the people who run and work in them with each having their own peculiarities and way of doing things. Some businesses maybe very profitable whilst others may have valuable assets such as plant, machinery and property. This makes it very difficult to compare any two businesses like for like. What we can do however, is to consider how much a business is worth by using a recognised valuation method, except that there are at least 6 of these and sometimes two or more methods are used when determining a value.
Why Have a Business Valuation?
Why do people get their business valued? It might be that the owner (or owners) of the business are considering selling some or all of their shares within the business, or that a buyer is looking at purchasing a business and that the purchaser needs to know what the business is worth “on paper” before making an offer. It might be on the death of an owner, or for drawing up a will, divorce or it might just be because the owner of the business wants to know what he or she is worth. There can be any number of reasons for wanting to know the value of a company or business.
How do you Value a Business Then?
This is where things get complicated as the recognised business valuation methods include: P:E ratios or multipliers, discounted cash flows, entry cost, industry rule of thumb and asset based valuation methods. Although a minefield for the uninitiated, it is important to to understand the most appropriate method(s) for the type of business being valued. For information on commonly used valuation methods, CLICK HERE
What’s the Starting Point for a Business Valuation Report?
The starting point in producing a business valuation report is to work from full sets of statutory accounts, preferably covering the last 3 years of trading, up to date management accounts and a budget or forecast for the current year. The Valuer will often have quite detailed questions and will need to know if any exceptional costs are likely to keep recurring or if just a “one-off”. As most business owners either pay themselves too little money or too much, the Valuer will need to understand what a realistic figure would be for someone running the business, to ensure that the valuation report provides a fair and realistic figure. Other points to consider are type of business, spread of turnover, types of customers, years of trading, depreciation, trade marks, IP, key employees, future business potential and so on!
“I was very impressed with the quality, a well drafted report brought together in such a short period of time. Thank you very much for the excellent help when needed most.” EO
“We required a valuation for an EMI share scheme and were provided a number of options which included HMRC approval. I’d recommend Stirling for their competitive, efficient and hassle free valuation service.” Shelley Wood Co-Founder, Director Gemba Advantage Ltd.
“Thank you for your service! I’m happy to say the report was provided fast with all the details mentioned, all the appropriate questions been asked. We will be pleased to work with you in future!” Oksana Eftimiadi, Finance Netcracker Technology
Simply fill in the form below and we will explain how you can obtain an independently prepared, professional business valuation letter or report. We will also send you a sample valuation letter & report: