While business valuation is hardly black magic, 3 common myths do need dispelling:
Myth 1: There is only one way to appraise a business.
Not so. In fact, there are three ways, known as approaches, to determine the value of a business. Each has strengths and drawbacks. That’s why a well-prepared business appraisal uses a number of business valuation methods to get accurate results.
Myth 2: Valuing a business involves filling out a couple of forms.
You wish! Business valuation is part art and part science. It requires that you make a number of important decisions about why and how you value your business. This way you get reliable business valuation results that you can interpret – and defend in any situation.
Properly prepared business appraisals account for this and get very accurate results. You can do this by analyzing the business carefully, choosing the appropriate business valuation methods, and drawing a well-considered business value conclusion.
Myth 3: Once my business is appraised, I am done.
In fact, a business valuation is valid only on the date it is completed. A business is like a living and breathing thing – its situation changes all the time. So does its value.
Re-appraising your business regularly is an excellent strategic management tool – it lets you see how your business value evolves in response to financial and operational changes in your business.