Why you should get a Business Valuation

by | Sep 28, 2021 | Business Planning

Whether you are thinking of selling your business or not, it is still worth having a free business valuation now. And if you are considering selling up within the next three to five years, it is likely to be beneficial to carry out some forward planning before you exit the business.

Exit planning is the process of getting your business ready to sell. Often people want to sell their business, but find that after a valuation, it’s not worth as much as they hoped. However, there are ways to address the problem and in order to be able to add value to your business, you need to know how it will be valued by the market.

Business brokers specialise in business transfers and can support you with the process of selling your business and work with you to help you achieve the price you want and in the time frame you need.

If you are not thinking of selling your business, it is still worth undertaking a business valuation as once you understand how your business will be valued, you can add value to it until such time as you do decide to sell it. You will also have a clearer idea of when that is likely to be.

There are three stages to the business valuation process:

1. Business Valuation
2. Report
3. Intervention (if required)

Free Business Valuation

A specialist business broker will be able to provide a free initial valuation, and they will explain in detail how the final valuation figure was reached. If the value is sufficient for your plans, the broker will take your business to market on your behalf.

Report

If the value is not sufficient for your future plans, then the broker will outline the profile of a company that has the value that you desire so that you have an action plan, and a target to aim for.

Intervention

Intervention involves creating a plan with clearly defined objectives to help you achieve the profile of the company that you want. Understanding how the market will value your business, and how you can add value to it is crucial. It is not as simple as doubling the profit to double the amount you receive for the business. There are numerous factors that come into play when valuing a business and a broker can help you to gain a better understanding of these factors.

Legal and Accountancy Advice

Specialist legal and accountancy advice can also help when it comes to the factors affecting value. One example of this could be a business that has the wrong business structure e.g. a sole trader that should be a limited company, LLP, or PLC. What would the most appropriate structure for this company be?

You need to take legal and accountancy advice on business structure and consider changing your company’s legal entity if this is more beneficial, but even this must be done in the correct manner to avoid incurring penalties from HMRC. A specialist solicitor and accountant can help you with this, will often uncover other issues that need to be addressed before the company can be sold.

Ensuring that your business is setup in the most tax efficient way in advance of its sale, is also key. An expert tax advisor can help you to set up your company in such a way that you and your family benefit as much as possible from potential tax savings when the time comes to sell your business.

These are just a handful of examples that could apply to your business when the time comes to sell it, but specialist advice and guidance from a business broker as well as legal and accountancy specialists will identify the issues which are specific to you.

Guest post contributed by David Winn-Morgan of South East Business Brokers Limited

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