To many business people business valuation looks like a big bang event. In other words, it rarely happens and then it’s over. Indeed, appraisers usually do valuations in support of some strategic need, such as selling or buying a business.
Also, courts often require appraisals in cases of legal disputes. Moreover, tax authorities use valuation in order to determine the amount of gift or estate taxes owed. Needless to say, business people may approach business valuation with trepidation and dread: expensive, challenging, confusing.
So appraisers create business valuations in support of their clients’ strategic needs. For instance, business people hire professionals to help them accomplish their goals, resolve differences, or work out a successful business strategy.
Valuation as a tool to make key decisions
Not a big bang but a strategic decision making tool, that’s what business valuation is really about. Are you a professional advisor? Then look at this practice area as a lucrative opportunity to help business clients make the right choices at the right time. Consider some typical scenarios calling for business valuation:
Business broker opinion of value
Business brokers often deal with owners who are in the early stages of planning an exit strategy. Sure, they would like to know what the business is worth right now. But more importantly, business owners need to find out what they can do in order to maximize their business value before the actual sale.
It is common practice among professional business brokers to offer an opinion of value on the client’s company. You can help focus the owners on what drives business value. And how to plan on increasing the potential selling price down the road.
As the company implements changes, you can revise the business valuation to demonstrate how the company’s value has grown. Happy clients and a successful business sale transaction in the making!
Another group of professional advisors that often offer business valuation services is life insurance agents. Partner buyouts are a fact of life and funding such events should be planned ahead of time.
A buy-sell agreement typically spells out how to value the partner’s share of the business. You then set up a suitable life insurance policy in order to fund the buyout. As time goes by, insurance experts often revisit the company’s valuation to make sure sufficient coverage is in place for a successful buyout.
Strategic business growth consulting
You can provide an invaluable service to business owners by helping them decide on the business strategy that creates maximum value.
For example, to pick the best from among a number of capital investment projects, business appraisers can explore what-if valuation scenarios to assess their effect on the company’s value. This is strategic business consulting at its most essential. In other words, business owners use valuation in order to pick the course of action that gives them the most bang for their buck.