From time to time, a business needs to look at itself and take stock of its value. The process of preparing a business valuation analysis is primarily an economic one. Before a company looks for a business valuations services firm to hire, they need to take some time to compile the necessary financial documents. Before the process begins, companies should get between three and five years of balance sheets and income statements together to being to the business evaluation firm. Here are some other considerations that need to be made as they approach business evaluation services companies:
- Think about the reasons you are doing the business valuation. It often comes as a surprise to a lot of people but the reasons a business needs to get a business valuation report completed has a very direct impact on the results of the analysis. If you are thinking about selling your business, a more simple and less complicated valuation may be the the way to go. If there is litigation of any kind pending, you may need a more detailed or thorough analysis done. Keep in mind the fact that the more complicated the business valuation is, the more it will cost to complete. One way some people explain this is to compare financial reports that are audited vs. those that are not. It takes a lot more work to do the former.
- Go to a professional business evaluation services company. Sometimes companies think that they can just have someone who is not specifically trained in doing a business valuation analysis. They will go to their certified public accountant. Some have enlisted the help of their real estate person to help complete the business valuation process. The real estate agent has experience looking at the value of a space and the accountant can do some kind of analysis based on income and tax liability but neither has been trained to do business evaluation services. You need a professional company or individual with this kind of training and experience.
- Ask about their specific experience. What other companies has the business valuation firm or professional worked with? It is important to go with someone who has a proven track record in the area of offering business evaluation services. Unlike doing your taxes, the process of conducting a business valuation analysis involves a lot more than addition and subtraction.
- Ask how well the company understands the market. The market is not a static thing. Conditions are constantly changing. You need a business valuation firm or professional who understands this and stays current with what is happening with the market. You want someone who has been working with companies now and is not making their assessments on data that was compiled or formulas that were developed years ago when things were different.
- Think about how much you can trust the business valuation services firm. Whomever you go with is going to have to have a huge amount of access to your financial and other confidential data. You may have some new products coming out that will greatly impact the value of your business. You need to know that the company you hire will maintain your confidentiality. A company that comes in and gets access to your data can very much undermine your business if they do not completely maintain your confidentiality.
- Make sure the business valuation services firm has experience with companies like yours. There are a lot of different kinds of businesses in different industries and of different sizes. The company or person who conducts your business valuation needs to be familiar with the unique challenges and opportunities that are applicable to your business. Make sure the business evaluation services company understands how to work with companies that are the same size as yours and that they get what it is that you do.
- Look at your budget. You want the best and most accurate business valuation analysis for your company but it needs to stay within your budget. You have to determine how much you are going to be able to spend on this process before you start talking to business valuation services.
Many companies balk at starting a business valuation process but it can be very helpful.