A good, comprehensive, and accurate current business valuation is both objective and subjective. While it typically accentuates the positives, it should also identify the negatives that could reduce a company’s value. Although there are many quantitative aspects to it, in which standard valuation formulas are applied to estimate the value of assets based on numerical data inputs, there should also be qualitative and creative aspects to it too. It is or should be a product of — and if performed correctly, completely, and well requires in its determination — both science and art.
An accurate current valuation of your privately-held business now (a “Current Business Valuation”) provides you and your company with a snapshot of today and a roadmap for tomorrow.
A Current Business Valuation is useful for (i) determining, in general, the price a buyer or seller is or may be willing to pay or receive in the sale of a business; (ii) fund-raising through bank loans or venture capital; (iii) gift and estate taxation matters; (iv) litigation and other types of dispute resolution, where quantification of damages is important; (v) estimating the value of partners’ ownership interests for buy-sell agreements; (vi) allocating a purchase price among business assets; (vii) intellectual property (“IP”) tax planning and compliance; and (vii) many other business and legal purposes.
A Current Business Valuation is also a useful base to work from to (i) look for potential existing hidden business value (or in other words what, if anything, makes your company special); (ii) develop new business value through the identification, creation, protection, and commercialization of unique business methods and IP; and/or (iii) potentially alter current business practices, methods, tactics and/or strategy to provide your business with a greater competitive advantage.
You need a good, comprehensive, and accurate current business valuation now, to provide you with a snapshot of your privately-held company’s general monetary worth today, and to identify for you how your business compares to its peer group. Only by seeing and understanding the “good, the bad, and the ugly” with respect to your company’s current status and standing in its industry can you take positive steps to make your company more competitive and to grow its business value and your wealth.
Sometimes the intangible asset or value already exists in a company, hidden to all but a select few with creative eyes and open minds. An unturned dull stone, not shiny to others, may be worth millions and millions of dollars in creating a business valuation that allows the company to be sold for multiples of its estimated quantitative valuation. Other times you need to consider for yourself and take advice from others, such as an experienced business mentor or investment banker, as to how best to increase your company’s business valuation. Good methods to do this involve, without limitation, identifying, creating, protecting (i.e., registering with appropriate government agencies where appropriate), and commercially exploiting unique business methods and/or IP assets.
**The complete version of this article can be found here.
