Understanding the Importance of Business Valuation

Your business is an investment, and like any investment, it is important to understand how valuable it is. By learning the true value of your business, you will better understand the overall health and well-being of your company, allowing you to better manage a potential exit strategy. Many business owners undervalue the importance of business valuation, leading to potential pitfalls and nasty surprises down the line. Even if you are not looking to sell your business anytime soon, a business valuation allows you to see how your business is tracking, which factors into any major decisions you may soon be making.

Taggart & Partners is one of the leading SME accounting firms in the Brisbane area, helping small and medium businesses reach their full potential. To enquire about our services, give us a call on (07) 3391 1188, send an email to enquiries@taggartandpartners.com.au, or get in touch online.

What is Business Valuation?

A business valuation, sometimes referred to as a company valuation, is the process of determining the worth of a company. This is typically determined by the cash flow of your business, alongside other economic factors as all areas are analysed during the process. Business valuation importance is showcased by its use in many instances beyond just determining sale value, as it is also conducted for taxation purposes, to present your company during a potential partnership agreement, and even during divorce proceedings. A business valuation is conducted by an independent party to avoid any potential bias.

The Importance of Company Valuation

Everything a business owner does is to increase the value of their business, resulting in increased potential income. Thus, the importance of business valuation is to make sure your business is on the right track, as campaigns and strategies that seemed profitable on the surface may not have had the positive impact you expected. Overconfidence is a detriment in the business world, which is why it’s important to trust an independent party to keep you informed of how well you are tracking. As these valuations are conducted by one free of bias, they are usually a reality check for owners who may overestimated their company’s worth.

How Does a Business Valuation Work?

Once you have consulted with your chosen independent party, typically an accountant such as the ones at Taggart & Partners, they will begin the process by analysing your financial statements. They consider comparable transactions, industry ratios, and other relevant information, before aligning the business with an industry standard or benchmark. Business valuation importance is proven by its ability to reveal the true value of the business. Undertaking a business valuation can be confronting, as it may reveal several flaws and weaknesses in your company, but this is a positive as it allows you to identify and remedy the problem.

The Benefits of a Business Valuation

If you are looking to sell your company, conducting a business valuation is vital for you to ask a fair price without potentially underselling or even getting ahead of yourself. This process provides an accurate breakdown of investment value to present to potential investors as well. The importance of company valuation is also apparent when looking at succession planning, mergers, and acquisitions. Conducting a business valuation annually allows you to see your business growth each year, which helps identify any factors that may be positively or negatively affecting your company.

Value Your Business with Taggart & Partners Today

At Taggart & Partners we understand the importance of business valuation and are here to assist small to medium businesses as they seek to sell or grow their company. Whether you are needing expert advice from a small business advisor or other financial services, our team of professionals are always ready to help.

To get started, give us a call on (07) 3391 1188 or send an email to enquiries@taggartandpartners.com.au, while you can also get in touch online with any enquires you may have.

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