Monday, November 12, 2007

Getting Good Value For Your Business

The face of business has changed unrecognizably in recent years. No longer are businesses for life; indeed most entrepreneurs are looking to make a killing by selling out. Thus, securing a good valuation is hugely important, and a good number can come in handy even when one is not planning to divest.

If you’re looking at selling your business, the paramount question is what you can hope to get for it. Be warned though, that this is one number that is not absolute. Differing circumstances and individual perspectives can have a definite bearing on the worth that is attached to your company.

Even if you’re not planning on selling out right away, getting a credible valuation can be quite useful, especially if you’re trying to rope in venture capitalists or strategic partners. Besides that, it also grounds your optimistic expectations and tells you exactly what you can hope for.

So, how does the valuation process work and how can you get a great one for your business?

Professional valuation analysts will want to look at the following before they throw up a number:

Assets – including productive assets, intellectual property and the order pipeline
Financial statements of the past few years
Employees, customers and other stakeholders – to know what they think about the business

That being said, different appraisers can look at your business in totally different ways.
Therefore, who you appoint to do the job is as important as anything else you may do to make the business healthy.

Some tips:

  • Get a like minded person for the job. A thoroughbred accountant is likely to give you the most pessimistic valuation, since he will be quite risk averse. If you can, appoint someone who has worked in industry, or better still, has some experience of running a business, who assigns value to opportunities.
  • Get a fair price for intellectual property. A number of businesses fail to attach enough importance to their brand names, trademarks and other copyright property, which can actually fetch a good sum. Make sure they are included in your case.
  • Choose an enthusiast. Look for more than experience and technical skills when you hire an appraiser. If he or she has a personal interest in your line of work, you are likely to get a better result.
  • Time it right. Choose to get a valuation done when things are looking up in the economy, at the stock-market and for your industry in general. Come what may, you cannot run away from the basics, so make sure your company’s future looks good at the time when the appraiser comes a-calling.