Most business owners will consider a business valuation only when they want to sell their company. However, there are other times when having an up-to-date business valuation will prove very crucial.
In an ideal business world, your business valuation should be done at least once a year to guard against the numerous potential scenarios that may show up.
Below are the reasons to get your business valuation done every year.
1. Something could happen to you
There are situations when we cannot predict certain unfortunate circumstances. One such case is death. The death of a business owner would mean a significant change in the business.
In a situation like this, having an up-to-date business valuation will help the family deal with the sale or dissolution of the company.
2. An opportunity to sell or merge could arise
One thing common in the business world is merging – or business owners striking deals that could lead to the growth of both companies. What if you come across such an opportunity, and the deal must be decided quickly? A current business valuation will prove very crucial at this point, allowing you to take advantage of the opportunity.
However, if you are not able to present one, and you must have one arranged, the deal may be off by the time it is ready, especially if you’re dealing with a strict/serious business person. There are many accounting firms in Singapore who can help with this process.
3. A new owner could come into play
Most businesses, at some point, would like to take on a new partner or LLC member. You cannot guess a buy-in price for him/her to pay. A business valuation will help you determine the exact buy-in price for your new partner.
Also, your new partner may insist on seeing your valuation to ensure that the price tag is worth it.
4. Contemplating an exit strategy
You might be approaching retirement and thinking about an exit strategy or the next step in managing your business. An exit strategy doesn’t necessarily mean selling or closing down the business.
It could be that you want to hand over the business to your heirs. It could also mean restructuring the company. In any event, you need a business valuation to determine the best strategy.
5. Expanding the business
When taking your business to a new level, like expanding or building new facilities, you may need financing from your bank or other sources.
A business valuation will help to streamline things, making the bank’s decision to finance your business so much easier.
6. The exit of partners or shareholders
If you must part ways with your partners or shareholders, you must know the value of your business to divide it up. Having this information will help to take a bit of the sting out of this unpleasant situation.
7. A business disaster could occur
A bitter truth, but it is often unavoidable. It would be great to have a business valuation after a business disaster. A business valuation can help establish a point of reference against which to compare the value of your business before and after the unfortunate situation happened.
After the disaster has happened, it would be near impossible to go back in time to value your business, at least not with precise accuracy.
8. Family crisis: divorce
If you are facing a family crisis such as a divorce, the court will definitely want to establish your business as an asset of the marriage. However, in court cases like a divorce, the judge will most likely appoint a neutral third-party, like an accounting firm in Singapore, to carry out your business valuation.
However, you may be able to avoid court if you know the value of your business as you and your partner start discussing and negotiating to settle the matter on your own.
To get an accurate and a professional business valuation, you can use an in-house staff who is knowledgeable in business valuation, or use the services of a business appraiser.
Also, you can hire an audit firm in Singapore to do the job. However, before you hire one, ensure that they are well experienced with businesses and not residential-type valuations. For further information, please feel free to get in touch with us.