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The-Core-Advantages-Of-A-Business-Valuation-in-Dallas-TX

The Core Advantages of a Business Valuation in Dallas, TX

The process of business valuation is a difficult and complex task that results in attaining the market value of a business. The valuation is often close to the real price of the business you or the buyers of your business are ready to pay. Business valuations offer a number of advantages to you and even to the potential buyers of your business. With this post, we’ll highlight some of these and include some benefits and limitations of the approaches used in arriving to a valuation.

Business valuations offer the following advantages:

Prepares you for sudden offers

You may receive spontaneous offers for your business and with a proper valuation you are prepared to meet these and give an informed response. You may also need to sell your business due to development of sudden circumstances, the process can take a few months, and being prepared only serves to reward you for coming to a valuation of your business.

Offers you a better position on the negotiation table

When negotiating for a sale, you are in a position to ask for a better offer. For e.g. with the net realizable value you get a value you can bargain for above it. This is because the net realizable value may not include for all intangible assets such as goodwill, industry knowledge, and expertise. You can thus hope to aim for an offer always higher that it. You get a true value and true picture of the company. Understanding what the business is worth goes a long way in helping you.

Use in calculations

It is a basis of all stakeholders to calculate taxes to be levied on the business, not only this but valuations are essential for divorce litigation.

Helps avoid disputes

You can avoid disputes when selling your business. The valuation is instrumental in a buy-sell agreement.

Protects your business

A valuation serves to protect the business. Once performed you will start seeing the strengths and weaknesses in the business, and it provides a chance to strengthen and compensate for the weaknesses you see. Another benefit will be using the valuation as a benchmark. If you have carried out a number, of valuations, these can serve as a trend and you have a chance to evaluate your business based on performance metrics.

Deal better with Third parties

The benefits of a business valuation become clear when dealing with third parties such as banks. These parties generally carry out their own valuation when it comes to engaging with them. A bank will carry out a valuation to surmise business strength when issuing a loan.

Determine return on investment

For larger public companies, valuations help in determining the return on investment. Once determined it helps to further understand how to best use earnings.

Advantages of Business valuation methods

The market approach

Let us look at the advantages with business valuation approaches; these have their own returns and setbacks. The simplest of these, the market approach, compares the value of your business to other businesses that have been sold recently. Initially the method seems straightforward, all you have to do is compare values, but then you start realizing that some of the values are imaginary. Companies will always be unique and comparing them to one another is subject to business conditions and even economic circumstances. To top it off even the buyer and seller may not be as willing as they should be in approaching a business deal.

The asset approach

The Asset approach has its share of advantages and disadvantages. The data for it is easily available, and it is perfect for firms that are non-current (fixed) asset intensive, example holding a lot of property.  It will be a help to those companies that have very short earnings period or have gone through a lot of volatility with it. The disadvantage of the approach is it may not even include or understate values of intangible assets such as Goodwill or Brands and customer lists.

The income approach

Let us look at the income approach now, and its discounted future earnings method. It has the strength of basing value on estimated future business results. The method can utilize either net earnings or net cash flow. The method is particularly useful when you know that future results will be different from historical values.

The method may understate the balance sheet value of assets. The valuation is discounted accounting for the intensity of risk. While its strength lies in understanding that the future can be different from history, the actual future can be so completely poles apart that it renders the valuation invalid.

Another method of the income approach is the Excess earnings method, which was introduced by the U.S treasury. The method takes into tangible and intangible assets and includes futures estimates (projected) of value that results from goodwill, but it can prove to be unreliable as one needs to estimate the time frame goodwill is expected to last.

Advantages of selling your business

So we’ve discussed the advantages of a business valuation and present the strengths and weakness of its approaches. Let’s now briefly look at the advantages of selling your business. Selling your business will result in liquidity for you the original owner when the business is bought. You can choose to remain involved at any length in your old business with the resulting liquidity. The clear benefit is taking advantage of a good business opportunity that presents itself, you get to sell your business for the highest bid and generate maximum profits. Selling your business and the resulting liquidity gives the opportunity to create completely new investments and diversify your business portfolio.

 

When coming to a good and reliable business valuation, navigating through its complicated process and finally negotiating through a lengthy sales period, we are your partners, representing you, maintaining your confidentiality throughout, and overcoming the many obstacles on the road to close a deal. We’re operating in multiple cities in Texas, including Dallas, Fort Worth and Colleyville, among others. Give us a call and we’ll see what we can do for you.

OUR VAST NETWORK OF FINANCIAL CONTACTS EXPEDITES FINANCING AND CLOSING THE DEAL.