8 Reasons To Get Your Business Assets Appraisal

Business Asset Appraisal Reasons

Assets Appraisal for business is a must these days and we will tell you why? Business valuation and asset appraisal can be a tricky process. With hundreds of external and internal influencing factors, the actual value of your business may remain unclear. Wiley Financial can help determine an accurate asset appraisal in San Diego.

With proper asset appraisal, you can find better clarity to guide your management decisions and external investors. It will also help you with legal documentation as well. However, many business owners still prioritize short-term investment and profit validation over running calculations with traditional methods.

There are multiple ways an asset appraisal firm can calculate the overall value of your assets. Market-based, cost-based and stock-based methods are some of the common appraisal techniques and provide a data-backed, unbiased view of your asset viability.

Still unsure about getting an appraisal for your assets? Read on!

8 Reasons for Business Assets Appraisal

Below are the top eight reasons getting an asset appraisal can help your business.

An Unbiased Health Check

Sometimes, businesses seem to be perfectly operational and profitable on the surface while facing cash flow, ROI, and liquidity issues on the backend. An asset appraisal includes the real, unbiased valuation of your assets based on their usage, depreciation and the net present value of the investment.

All these factors uncover hidden issues in the business that can cause sustainability problems later on. Many business owners focus on current sales and profitability while neglecting the long-term capital and growth needs of their business.

With projections related to future replacement costs, repairs and capacity issues, you can plan ahead and keep your business running smoothly.

Not only this, you may be undervaluing your assets which can lower your defensibility when pitching to new investors.

Exit Strategy Planning

When planning to sell your business, proper valuation and insight into the financial health of your business are incredibly important. Without access to accurate asset valuation, the future trajectory of your business operations and success cannot be predicted.

Because assets are more than just the machinery and furniture used by your business – the power of your brand name and goodwill also play a huge role in your exit strategy. Most investors look for a sustainable business with the least amount of uncertainty.

Attaching defendable values to your goodwill, operational excellence, and customer loyalty can give you higher negotiating power when selling your business.

Capital Raising

There is no doubt that every business runs into financial problems at some point. Whether you need capital to keep the business running or to expand due to peaking capacities, every external source of finance demands a validated valuation.

Banks and private investors tend to look beyond just short-term sales and market response; they want to minimize their risk by investing in sustainable businesses.

To show your trustworthiness and ability to bring a return on investment, you will need to properly appraise all your assets. An asset appraisal will help you attach a financial value to every strength of your business.

There may be factors that often get overlooked but provide value to the business. These can include your social media presence, the traffic on your website, and even any awards or recognition it holds.

A professional asset appraisal can help you uncover all these values and make your business seem safer and more investable.

Planning Your Estate

Every business owner needs a well-defined, legally sound succession strategy. If you want to transfer the rights to your business and interests to the next generation, you will need a validated asset appraisal for tax purposes and estate planning.

If your business holds a sizable estate, you will need a tax professional to help you minimize your tax exposure during the transfer of rights. This will also require a lot of documentation related to business and asset valuation that is best done beforehand.

Asset Appraisal for Business, in such a case, can help you achieve better control over your business while plan the timing and heirs of your business according to your preference.

Offering an ESOP

An employee stock ownership plan (ESOP) is a great way to keep your employees loyal and committed to the company, yield tax advantages and also brings better liquidity within the business.

Before you are able to create an ESOP, you will need to get a third-party evaluation and appraisal of your business and assets to set a fair price per share. This is because every business must provide a fair market valuation before proceeding with an ESOP.

Valuation is heavily dependent on the current price of your business assets within the open market which can only be derived from an independent appraisal company.

Not only this, you will need an updated asset appraisal along with the overall business valuation every year so the price per share can be updated fairly and remain within legal regulations.

Retirement Planning via Asset Appraisal for Business

Business Owners, of course, don’t have the financial security and advanced retirement options that employed individuals have. Their retirement plan is mostly dependent on either the automation or handover of the business.

However, most business owners, especially sole proprietors, often overestimate the long-term viability and valuation of their business.

With in-depth audits, financial assessments, and future forecasts, asset appraisals can help you plan more effectively for retirement. Depending on the appraisal, you will gain the clarity you need to save up adequately and invest the right amount in retirement funds.

Mergers And Acquisitions

An asset appraisal proves beneficial for both parties during a merger or acquisition. While it helps the buyer ensure a fair price, it helps you as the business owner stand your ground and prevent underpricing.

A holistic asset appraisal can also help you prevent any disputes with the merging company later on with the help of long-term analysis and upfront forecasts about future value.

Whenever you sell all or part of your business, a company will aim to pay the lowest price possible. They will also continually focus on and highlight the weaknesses in your businesses to secure a better deal.

In such a case, having access to powerful data about long-term sustainability, asset viability, and their third-party validated financial value can make a huge difference.

Such data will help you counter their arguments and defend the accurate value of your business. Not only this, but it can help you attract more interested buyers as the audit-backed values will bring higher certainty to the investment.

Management Decisions

Every business needs in-depth insight into its financial data to make management and operations-related decisions. Asset appraisal can shed some light on the important details about the depreciation of your assets, replacement and repair costs and future capacities. These can help you manage cash flow more thoughtfully and keep the required cash reserves at all times. Along with this, a timely valuation can help you uncover growth and scaling opportunities by mapping out all the efficient and inefficient components of your business. With the valuation of intangible assets like brand image and acquired customers, you can judge the future growth of your company. In some cases, it can also prevent business owners from taking the unnecessary risk of investing in a slowly dying business.

Conclusion

Even though asset appraisals are more common when selling your business or planning an exit strategy, they can help a business at any stage of growth.

Along with satisfying legal and investment demands, they are a great source of insight into the well-being of your business. Timely replacements, viability estimations and future capacities are all influencing factors that can help a business owner make better management, investment and cash flow decisions. If you are interested ingetting an asset appraisal in San Diego contact Wiley Financial today!