What is Business Valuation and Sale?

When a company decides to sell its business, seek expansion financing, or look for a partner, the value of the business has to be determined. Using income and expense data, the fair market value of a company can be assessed. Some important factors that must be taken into consideration when valuing a company include calculating the available cash flow, determining the value of intangible assets, and analyzing risk factors.

Why is Business Valuation and Sale important?

Business valuation is the value of a business if it were to be sold. The sale of a business is a transaction in which the business changes ownership. These two key terms are important because a business is an asset - a shareholder asset, a partnership asset, or the asset of an individual. It is important for these entities to understand the value of the asset that they hold.

The higher the business valuation, the more likely the business is to get contributing partners, finances for expansion and growth, and proceeds from the sale of the business.

The sale price of the business will be based largely on the valuation of the business. If the buyer needs to take out a loan in order to pay for the cost of the purchase of the business, the buyer needs to be able to prove that the business has a certain value to the lender. The valuation will prove to the lender that the business actually has value and is a worthwhile investment risk.

Whether you are looking to understand the cost of the business asset you own, or you are looking to buy or sell a business, you need to understand what business valuation and sale mean to your enterprise. By understanding these terms, you will be able to add value to the business by developing technologies and processes that make the business more appealing to a purchaser.

How should a vendor for Business Valuation and Sale be selected?

There are several factors to take into consideration when determining what the value and potential sales price of a business could be, including the operating costs, revenue, assets, and more. These factors need to be meticulously analyzed against the business potential, economic growth, and market growth.

In order to find the right business valuation vendor, it is important to take the following considerations into account:

• Experience - does the business appraisal vendor understand the risks associated with having a business in your industry? Does the vendor have a history of valuating assets for businesses in your industry, such as office space, machinery, tools, equipment, and more?

• Financial Expertise - A business valuator needs to understand how operating costs, assets, revenue and all aspects of a business's financial portfolio work together in order to determine the value of a business. For example, a car dealership may not have high revenue, but it certainly has a huge amount of assets that add to the value of the business.

• Professional Designations - Does the vendor have a professional designation, such as any of the following:

• CBA - Certified Business Appraiser
• ASA - Accredited Senior Appraiser
• CPA/ABV - Certified Public Accountant, Accredited in Business Valuation
• CVA - Certified Valuation Analyst
• CBV - Chartered Business Valuator

• Cost of the Appraisal - The cost to have a business appraiser valuate your business may range from between $295 to $35,000, depending on the size of your business and the vendor. Check for all costs up front.

Additional Resources:

• A business valuation calculator:

http://www.business-valuations.biz

• Business Valuation 101:

http://www.score.org/article_business_valuation_101.html