Banks play a much larger role in our economy than the average person might think. It’s not just a safe for our money or a place where we can withdraw our savings from. Banks play a huge role in the stock market and economy in general and they can make a big impact on companies that do business with them. Although trust in banks has decreased slightly over the last few years, they’re still a major and valued institution in our country. (In 1980, 60% of people had confidence in their banks, compared to in 2014, where just shy of 50% of people had confidence in their banks.) Nevertheless, there are over 5,000 commercial banks in the United States and most people have a checking or savings account. If you’re running a business, whether it’s a small business or a large corporation, it’s worth your while to think about getting a business valuation. A small company valuation can be especially useful if you end up deciding to sell or merge with another company and will make banks perk up and look at your company more closely.
What Is Business Valuation?
Business valuation is generally done as an exercise in analyzing your company’s economics. You’ll need an income statement and a balance sheet to complete a business valuation (even for a small company valuation), and need at least 3-5 years of income statements and balance sheets at your disposal. Business valuation is the method of evaluating how much your asset(s) and/or company is worth, using a range of techniques. Management, how the capital structure is made up, how much future revenue the company stands to make, and the market value of all their assets are among the items that an analyst will look at. Analysts will also look at the market value and the intrinsic value of your company. (Market value is how much a buyer would pay to the seller, whereas intrinsic value is the estimated value of a company based on how much it could earn in the future, among other things.)
What Do I Need For Business Valuation Services?
If you’re engaging in business valuation, you probably want to know about your business worth. For those two things, you need to decide why you want business valuation, whether it’s for small company valuation or a much larger corporation, and getting all the information together. Experts will want to know how you measure business value and under what set of conditions you do so (aka the standard of value and the premise of value). They’ll determine your value by looking at sales of similar businesses that have occurred recently, based on earning power and risk assessment, and the company’s assets.
You’ll need an in depth report of what is and is not for sale to do an appropriate valuation, a financial history of the company, balance sheets and income statements, as mentioned above, tax returns, company structure and management, a detailed account of any litigation the company might have been involved in, a market and competitors analysis, and often much more. The valuation service will let you know in advance what they require to do a proper valuation.
What are the Advantages of Calculating My Business Worth?
If you’re thinking about doing a small company valuation, having one already completed can be a good stepping stone towards selling the company or increasing revenue. Having a business valuation completed can help you get a new loan, switch ownership or management, settle out a legal dispute with another partner in the business, and more. It’s good knowledge to have just in case. This also ensures that if you do choose to sell your company, you won’t get cheated out of what your business and its assets are actually worth. It can also have the added bonus of keeping employees incentivized with bonuses that are linked to the business’s growth.
Getting a business valuation can be a useful asset for any business, no matter how small or large, especially if upper management’s eyes are on eventually selling the business. Investors like banks may also take more notice of your company if it’s had a valuation.