Why would a business owner want to gain a better understanding of the value of their business? Whilst it could simply be pride or curiosity there are many reasons why an independent valuation is carried out which are not necessarily related to a prospective sale.
Expanding your business
If you are expanding you may wish to bring in new investors or incentivise staff with share options. Having a current business valuation will help you in negotiations and also in dealing with HMRC when a price is agreed.
Divorce or a Family Issue
Whether it is due to the requirement to value an estate for divorce purposes or simplifying the process of passing your business to the next generation, an independent valuation will assist in providing a starting point for negotiations.
Disputes and Litigation
Sometimes shareholders will enter into a dispute, particularly when minority shareholders are involved who may feel that their rights have been impinged upon. It is common in such circumstances for a company valuation to form a part of the legal process.
Which type of valuation applies?
There are many ways to value a business and the most appropriate depends upon the nature of the company being valued, some common methods are:
- Multiples of adjusted profit: This method involves the application of an appropriate multiple to the sustainable profit that the company can generate. The multiple is usually generated based upon the sector in which the company operates, recent company sales and the size of the company.
- Asset fair value: Sometimes a company may have its true value represented by the assets which it holds. This is typically the case with property investment companies.
- Contract value: It is plausible that a company, whilst not having the track record required to carry out a multiples of profit valuation, doe have significant and valuable customer contracts.
How can we help?
Whether you are looking for a ballpark figure or need a more detailed valuation, please contact one of our partners on the top right-hand side for more information.