Business Valuation For Buying, Selling or Expanding a Business

Business valuation experts

When people trust their bank, they are more likely to remain with that bank throughout their lifetime. Furthermore, when they need a business loan, they are more likely to approach their existing bank rather than open a new account elsewhere. This is one of the many reasons why it’s important to choose a bank that you trust and maintain a positive relationship with them.

That said, it’s interesting to note that only 47% of the people currently banking in the United States trust their bank, and 7.7% don’t have a bank account at all. In 1980, 60% of people claimed to have confidence in their bank, while in 2014, just 21% did so.

While the reasons for this will vary, there is likely some overlap. Many people, for example, may prefer investing their money in stocks and bonds for a potential higher return. Others may be concerned about an economic crisis, and choose to keep their assets accessible and fluid.

Other individuals may choose to make an investment in their future by opening a business. While some entrepreneurs may have the funds to launch a business venture, at some point, they may need to take out a business loan to maintain or expand their operations.

When seeking a small business loan for an existing enterprise, the bank will usually conduct a business valuation to determine the business’ worth. At this time, they may request three to five years of income statements and balance sheets. It’s important to have at least this many years of financial statements in order to make an accurate valuation of the business.

If someone is planning to sell their small business, a small business valuation appraisal also needs to be conducted. In addition to have the financial statements mentioned above, there are other issues that come into play.

In order to establish a business’ worth, the reasons for the valuation being needed are taken into account. In other words, is the business owner seeking a loan or are they interested in selling their business or company?

There are three approaches to determining a business’ value:

  • By comparing it to similar businesses that have recently sold
  • By determining the business’ earning power and assessing risk
  • By analyzing the business’ existing assets

If you’re interested in learning more about small business valuations, there are a variety of resources available. In addition to business valuation software that can calculate the worth of your business, you may also be interested in calculating the worth of a business in which you want to invest or purchase.

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