For entrepreneurs like you, it is important to know the economic value of your business to know if it has an edge among your competitors. Often, you are fixated on the profits that your company makes that you fail to see the true potential of your assets. Thus, it would help if you hire a business valuation service in Singapore.
What is a Business Valuation?
According to Investopedia, a business valuation is a process of determining the estimated economic worth of a business as a whole. This is a corporate finance method in which it is done if ever a portion of operations or assets are about to be sold to an investor. It is also useful in mapping out an effective capital structure.
Different Types of Business Valuations
This service does not deliver a one-size-fits-all solution. It composes of different methods that can help entrepreneurs utilise this service better for various business ventures. Here are some of the many types of business valuation methods:
1. Using Historical Earnings
In this method, the gross income of the business would be looked into. This is the amount of money that your company initially has before you spend for your business needs. The gross income will show if your company has the capacity to pay all your loans and other debts. This is also used to cover all the expenses that are needed to be made to run business operations.
Using the data of the gross income, it would be easier to see if your business has a good cash flow. For investors, this is important because it just means that you are less likely to get bankrupt in the future. They will be willing to work with your company if this is the case.
2. Assessing Your Assets
Your assets can also be in the form of real properties so a real estate valuation is also done. Aside from tangible assets such as these, intangible assets like customer relationships, trademarks, and brand recognition are also measured. Knowing their estimated value can make the business look more appealing for investors.
3. Future Maintainable Earnings
Often, this is calculated using the financial reports of your company during the last three years. The report should include the current profit, sales, expenses to determine if ever your business has a huge potential to earn more in the future.
4. Relative Valuations
In this method, another successful business that is similar to yours will be evaluated and they will compare it to yours. Doing this can help in determining if your assets have a significant value in the current market.
How Can It Help Your Business?
There are many ways on how you can benefit from a business valuation service. It can help in expansions or it can be of use for selling, retirement, and a whole lot more! Check out this list below to know more how can this service become a worthwhile investment:
1. Get an Advantage in Mergers and Acquisitions
Mergers and acquisitions are great if you have plans to expand your business. You will be able to obtain new customers and it’s easier to enter and compete in a whole new market. However, the hard part is convincing other businesses to become a partner.
Most often, you will face challenges in getting your fair share of the profit in case the partnership becomes a success. Thus, it would be better to invest in business valuation advisory services because their financial advisors can provide documents that will tell how much your company should be getting in this partnership.
2. Better Utilise Your Assets and Properties
You will never know the true worth of your assets and properties unless you conduct a business valuation. Using this, it’s easier to know which are the ones that should be sold and let go. There are some assets that do more harm than good because it costs the business so much to maintain them. So, better do a thorough valuation to know what are those that are worth keeping in the long run.
3. Map Out Your Retirement and Succession Plans
For sure, you are going to be the head and owner of your business in the future. You will have to step down and pass it over to the next generation since you will most likely have to retire. Thus, it would help if a business valuation is done beforehand to know how much profit should you earn for you to have a comfortable retirement plan.
Doing this can also help in succession planning because it can assess how much a shareholder or an executive office has contributed to the business. You will be able to know who deserves to get higher positions in the company.
Business valuations are important because of how these can help your company grow. So, if ever you need to hire this kind of service, then reach out to Twin Pillars now!
