Business Valuations in Nottingham
What is a Business Valuation?
A business valuation helps you determine the market value of your business. By using a range of measures, you can understand the economic worth of a business. This is useful for entrepreneurs and small business owners looking to buy or sell a company.
A company valuation can also help when:
- securing investment – think of Dragons’ Den, where investors want to see a realistic figure and value in the deal you give them
- setting a fair price for employees – if your employees want to buy and sell shares in the company
- growing or expanding your business – an annual valuation helps to secure funding and focus your energy on areas for improvement
- filing your taxes – you might need to provide valuation figures as part of your company tax return
- establishing a business partnership – or buying out an existing business partner
Ultimately, you want to reach a valuation that doesn’t sell the business short. It also shouldn’t overstate what the business is actually worth.
It’s tricky to find a balance – if you’re finding the valuation easy, you might need to revisit your method. It’s a good idea to combine a couple of valuation techniques.
What affects Business Valuation?
While there are some parts of a business you can value easily, there are always going to be intangible assets.
Beyond stock and fixed assets (like land and machinery), which are tangible and have clear value, you should also look at:
- the business’s reputation
- the value of the business’s customers
- the business’s trademarks
- the circumstances surrounding the valuation (like a forced sale rather than a voluntary one)
- the age of the business (consider startups making a loss that have lots of future potentials, versus established profit-making companies)
- the strength of the team behind the business
- what kind of product do you have
These intangible assets make it fairly difficult to reach an accurate valuation, but there are a number of techniques you can use to make it easier.
How do you Value a Business?
There are a few approaches you can take when it comes to how to value a company. We explain more on each of these below.
- price to earnings ratio
- entry cost
- valuing the assets of a business
- discounted cash flow
- industry rules of thumb
- valuation based on what can’t be measured
How much is My Business Worth?
As we mentioned earlier, valuing a business can help you focus on areas for improvement. There are lots of things you can do to help secure a good valuation, including:
- planning ahead: have a solid business plan, with a focus on how you’re going to achieve both short-term and long-term results
- reducing risk: for instance, if you rely on a particular group of customers, consider diversifying
- putting great processes in place: think about how you store information, whether it’s financial records or simply how the business works. Often, the more you can show, the higher the confidence in the business
What works for one business won’t always work for another. By giving an overview of several popular business valuation methods, though, we hope you’re closer to understanding how much your business is worth.
Benefits of Business Valuations?
What are the Benefits of Business Valuations?
Greater Knowledge of Company Assets
By understanding a more proper financial figure, or a range of values to be gained from the valuation processes, business owners can know how much to reinvest into the company and how much to potentially sell their company for.
Broader Understanding of Company Resale Value
Understanding your company’s resale value also enables you to negotiate a higher selling price. A valuation specialist will provide a list of comparable transactions to assist in solidifying your stance on the higher selling price.
Makes Mergers and Acquisitions Easier
With a business valuation, you know the value of your company and are able to negotiate the purchase price by showing a consistent trend in value growth provided through the business valuation annual exercise.
Business valuations look at a company closely to see how it performs and where the risks are. The valuation looks at all parts of the business that drive value. A business valuation can also reveal future problem potentials.
Prepare For The Worst
When you prepare for the worst ahead of time, you can avoid legal mediations or lawsuits trying to figure out how much your business is worth. If you have to go through this process under the stress of a lawsuit, it is a much different experience.
If you want to see how far your business has come in a certain period of time, a business valuation might be in order. Knowing where you are and in which places you are excelling will help you understand areas you can continue to improve upon.
How can Seagrave French help you?
How can Seagrave French help you?
“Do you know what your business is worth?”
Valuations can be required for…
- Monitoring how the business is performing against goals;
- Taxation and negotiating with the tax authorities;
- Business sales and purchases;
- Business mergers;
- Divorce proceedings and matrimonial disputes;
- Raising finance;
- Company buyback of shares;
- Tax planning;
- Financial reporting requirements;
- Shareholder/partner disputes;
- Pension and exit planning.
We can provide business valuation services for unincorporated entities and shares in unquoted companies based in the UK including assistance with dispute resolution and litigation.
Small Business Valuation
Small business valuation is the process of determining the worth or value of a small business. This is typically done when a small business is being sold, seeking financing, or going through a major restructuring.
There are many methods in the small business valuation, including:
- Income-Based Approach: This small business valuation approach calculates the value of a business based on its expected future income.
- Asset-Based Approach: This small business valuation approach calculates the value of a business based on its assets minus its liabilities.
- Market-Based Approach: This small business valuation approach compares the business to similar businesses in the market to determine its value.
Small Business Valuation Strategies
Small business valuation takes into account a number of factors, including the size of the business, its financial performance, its assets and liabilities, and its growth potential. The ultimate goal is to arrive at a fair and accurate price for the business that takes into account all of these factors.
There are several strategies for small business valuation, which can be broadly categorized into three main approaches: income-based approach, asset-based approach, and market-based approach. Here’s a brief overview of each approach:
Income-based approach: This small business valuation approach estimates the value of a small business by assessing its future earnings potential. It involves calculating the present value of the expected future cash flows the business will generate, and discounting them to their present value using an appropriate discount rate. The income-based approach includes various methods like discounted cash flow (DCF), capitalization of earnings, and the excess earnings method.
Asset-based approach: This small business valuation approach estimates the value of a small business by assessing its assets and liabilities. The assets can be tangible or intangible and may include property, equipment, inventory, and intellectual property. The asset-based approach includes various methods like the adjusted net asset method, the liquidation method, and the replacement cost method.
Market-based approach: This small business valuation approach estimates the value of a small business by comparing it to similar businesses that have recently sold in the market. This method involves identifying a set of comparable businesses or transactions that are similar to the small business being valued and analyzing the selling prices or valuation multiples. The market-based approach includes various methods like the guideline public company method, the guideline transaction method, and the comparable company analysis.
Ultimately, the best strategy for small business valuation depends on the specific circumstances of the business being valued and the goals of the valuation. It is often recommended to use a combination of approaches to arrive at a more accurate and reliable valuation.
Why choose our Small Business Valuation Services?
Here at Seagrave French, we specialize in providing accurate and reliable business valuations including small business valuations to help business owners like you make informed decisions. Our team uses a variety of valuation methods to ensure that we arrive at an accurate and fair price for your business.
In our small business valuations, we use income-based methods, asset-based methods, and market-based methods to ensure that we arrive at a comprehensive and thorough valuation that takes into account all relevant factors. Our clients have been consistently impressed with the quality of our work and the level of service we provide in business valuations including small business valuations.
Don’t let the stress of business valuation weigh you down. Let us take care of the hard work for you, so you can focus on what you do best – running your business.
Contact us today to learn more about how we can help you with your small business valuation needs
Whatever your ambitions, we will commit to them wholeheartedly and deliver the premium accountancy services you deserve. Get in touch today to book a chat with our chartered accountants in Nottingham at Seagrave French.