We understand the significance you place on your business. However, have you ever conducted a Business Valuation to assess the genuine economic value or worth of your business?
The need to determine the true economic value or worth of a Business or a Business unit should be one among the top priorities of Businesses today in the advent of a dynamic & volatile market due to competition, enhanced IT capabilities, growing investor awareness & so on. Sale of the whole Business or a Portion of its operation, Mergers, Acquisitions, Disinvestment, & Corporate Takeovers have become the order of the day across the globe & are a regular feature today. Business Valuations becomes necessary during various stages like settlement of disagreeing partner, bank loans, legal disputes and so on. These scenarios indicate the significance of Business Valuation in determining the present status as well as the future prospects of a company, which in turn provides an understanding of how the corporate value & shareholders’ wealth could be maximized.
A Business valuation not only tells what is the worth of a business, but also how is it generated. The value of any business can entirely come down from any sources. Local businesses for example may have higher value for a particular community, but not for specific buyers. It always comes down to the details & that is why business valuation becomes essential which in today’s scenario is a tedious procedure & requires a lot of formalities. Therefore, the role of Professional Valuer is a key to the objective evaluation of a business considering multiple facts & figures related to the past performances of a company, internal resources, intellectual capital as well as the environment as a whole-Economic, Industrial, Social & so on.
Valuation sometimes requires analysis of Future earning capabilities, Company’s Management, Asset’s Market Value as well as its capital structure. The tools used for valuation can vary among evaluators, businesses, & industries. Discounted Cash flow, Similar Company analysis & an Analysis of Financial Statement are among the most commonly used Valuation methods.
Why Business Valuation?
Valuation to be done can be based upon Mandatory requirements (mainly as a consequence of statutory & contractual agreements –example inheritance disputes, partners leave or join.) or Non-Mandatory requirements initiated by the entrepreneur’s decision of purchase or sale of business, initial public offering, mergers & acquisitions & so on.
The reasons for valuation lie in the answers to the below questions:
1. Where your business stands today?
Determining current value of the business is of utmost importance in today’s changing environment to stand tall in the competition. This provides a baseline value & an understanding of how far it has reached since its inception. Knowing today aids in planning for tomorrow.
2. What are your Growth prospects?
Current Value Analysis helps in making informed decisions relating to financial goals, business & marketing strategies; rendering an insight to company’s management regarding potential for innovation & growth.
3. Are you planning to sell your business?
Unveiling an appropriate Resale Value is highly important to arrive at a fair deal & to be in a beneficial position while settling a sale deal. You need to be aware of what your company’s resale value really is in order to negotiate a higher selling price.
4. Are you planning Mergers & Acquisition?
Major companies might try to acquiesce your company or merge with you. Knowing the current value of the company as well as future prospects will allow you to accordingly accept or reject the deal. When you know what your business valuation really is, you are able to negotiate your way to the appraised valuation numbers provided by a well-known & reputable valuation determination service.
5. Are you trying to resolve disputes among shareholders/legal dispute?
Divorce, Bankruptcy, Breach of contract, dissenting shareholder & Minority oppression cases, Economic damages computations, Ownership, Inheritance, Partners’ disputes, are some of the many cases wherein a valid valuation is essential especially from the legal point of view.
7. Taking Bank loans?
Sometimes your business needs extra finances to deal with those extraordinary circumstances including acquiring of a business. For giving you that financial push, the Lender will often require a valuation report, depending upon the size & type of your businesses. Economic & Market challenges are often faced by specialized business. In the verge of uncertainty in the industry to which the Company related to, the Lenders might reduce the value & so it is important to produce more security. In this scenario, support from an advisory team will be helpful in the business valuation.
8. Trying to attract new investors?
New Investors could be approached by Companies as a savior from financial distress or for expansion purpose. Potential investors are always keen to looking at the prospective return from the investment made by them & are therefore concerned about the Valuation Report by a certified professional Valuer.
9. Planning an exit strategy?
When the age of retirement comes you cannot quit all of sudden & go. A valid plan in place is always a requirement at the time of exit as well so that you do not end up getting less as compared to what you have invested in your business. Business valuation helps in planning the exit strategy fair for all.
A Proper Business valuation caters to all of the above scenarios & complex circumstances which should be performed by Expert Valuation Professionals who could make a more informed decision in the choice of Valuation Models based upon the purpose of valuation, size & nature of your business. Once your business’ valuation has been established, set new goals aiming at the expansion of existing value. Comparison of valuation of different years also throws light on the possible room for improvement.
How can Fundforth help?
We have a strong team of financial experts who has decades of experience in middle east as well other countries. The reason companies choose us is for our competitive pricing in all the emirates of the UAE and considering us to be the best in providing cost-effective financial solutions, eliminating infrastructure and administrative hassles, enhanced efficiency, proven data confidentiality & security, complete transparency of operations, impeccable financial reporting, excellent coordination and communication.
We at Fundforth have a team of erudite Chartered Accountants who are very experienced and are up to date with the industry requirements, the latest accounting and audit tools, integrated business process automation, and have strong acumen to know the ongoing trend of artificial intelligence in the accounting profession.