Business Valuation: When & Why Does It Become Essential?

By Author: Cruz Martin
Total Articles: 187
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Business valuation is a process through which the economic value of the business is determined. Business valuation is many times required for purposes like resolving disputes related to estate and gift taxation, divorce litigation, allocating business purchase price among business assets, establishing value of partners’ ownership interest for buy-sell agreements, etc. However, business valuation is mainly required during mergers & acquisitions and strategic alliances. Every business should consider having a current business valuation periodically. The main objective of business valuation is to estimate the fair market value of the business. Business valuation can help to improve the business. It’s wiser to obtain a business appraisal on time, before it gets too late to work out on any latent difficulty or before it gets too late to tap any unseen but existing opportunity.

When selling off a business, most of the business owners who don’t get business valuation fall prey to selling off business at a discounted price, i.e. a price which is lesser than what actually the business was worth of. This is because of ...
... unawareness of the actual business value and thus unavailability of any reason to justify the sales price negotiation. On the contrary, most of the business owners who are aware of their current business value because of business appraisal fetch premium price on sale of their business enterprise, i.e. money more than the actual value of their business enterprise. Knowing the current business value is essential so that the business owner for many reasons like, planning a safe business exit strategy, providing justification of desired value of business when selling the business, keeping a benchmark to estimate future growth, tax calculations, buy-sell agreements, and getting aware of business risks and opportunities on time.

Business valuation by independent, outside business valuation specialists strengthens the credibility of the business and fills confidence in the employees, the lenders and also the prospective investors. Business valuation gives a clear picture of the current business. This makes the vision of planning & implementation required for achieving the business goals simple and more precise. Business valuation becomes essential even when expanding the business, to know what wealth currently lies in hand and how strong is the current economic position of the business to meet the investments and expenses for expansion of the business. When expanding the business, there also arises a need for borrowing money from banks and other lending money institutions. Banks and other money lending institutions lend money on the basis of their confidence from current business valuation. Expert business valuators in Gold Coast like, JWA Business Valuations have made the task of appraising the business very simple and convenient. Business valuations services in Gold Coast by established firms like JWA business valuations have made it convenient for business owners to get business valuation services.