Business Valuation Services in Scottsdale
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Wiley Financial is a trusted company with objective industry experience in business valuation in Scottsdale and the rest of Arizona. Whether you are planning on getting new investors or preparing to sell your business, you need a valuation.
A functional business valuation helps you determine the economic worth of your investment. Business valuation is a complex analysis that requires a lot of accounting and financial knowledge. For this reason, many investors in Scottsdale prefer to work with certified professionals. An expert provides a thorough evaluation and objective analysis of your business.
Wiley Financial employs different professional approaches to evaluate your business. These valuation techniques consider liquid assets, equipment, properties, inventories, and other items with economic value. Other factors considered during business valuation are your projected earnings, management structure, revenue and share prices.
Why You Need Business Valuation in Scottsdale
Exiting Your Business
Owing to the importance and complexity of business valuation, you will not be conducting them frequently. However, there are instances when you must perform an effective business valuation. When planning an exit strategy in your business, it is imperative to have a valuation. The valuation will provide you with a base value and increase the profitability as you exit. However, starting your plan would be best in order to address voluntary and involuntary transfers when the timing is not critical.
If you keep an inventory of an annual business valuation, you will be prepared for expected and unexpected sales. You will also get clarity of your business’ fair market value and avoid chances of inaccuracies. Moreover, if you want to sell your business, you need to clarify the worth of your business to a potential customer. If you buy a business, consider looking at the potential income, market conditions and viability.
A current valuation of your business is also good for strategic planning. With good planning, you can make better business decisions. Valuation also helps you know the value of your shares. When transferring shares to another entity, you will get better value for your money.
In addition, business valuation in Scottsdale is important when looking for funding. Banks and other institutions always require a valuation when negotiating for a credit facility.
Other purposes for a business valuation are tax, litigations and mergers. Wiley Financial can help you document a professional business valuation for better credit facility terms.
Methods of Business Valuation
It is the most subjective valuation method. While using this method, you can get the value of your business based on the similar enterprises sold in the industry. However, this method is only applicable to companies with enough market information from other peers. The market value approach is a challenging method when valuing sole proprietorship businesses. Individuals own sole proprietorship businesses and it isn’t easy to find valuation data from them. Since the market value approach is somehow imprecise, you will be forced to opt for negotiation, especially when looking for an investor. Nevertheless, the market value method provides an idea of the worth of a business before bringing in an accurate method.
As the name implies, the method considers the value of the assets to determine the worth of a business. When conducting a business valuation using this method, deduct total liabilities from the total assets. These values are normally on your business balance sheet. There are two ways of conducting valuation using the asset-based method:
Going concern is a favorable method if you plan to stay afloat in your business for long. It is an ideal way to value companies without the intention of selling their assets. The method considers the current business equity, i.e., your business assets less the liabilities.
2. Liquidation Value
The liquidation value method assumes that a business has closed and the assets need to be sold or liquidated quickly. The company’s value is calculated from the net cash from the sold assets. The liquidation method leads to a lower value than the fair market value. However, this method is preferred when there is an urgency to close the business.
The ROI-based formula relies on the profitability of your business. It is a preferred method used by investors as it projects the actual potential or the return on investment (ROI). It reflects the value an investor will accrue by getting into the business.
Most investors want to know their capital return before investing their money. However, a higher return on investment mainly depends on the market. When using this method, you will need to convince an investor or a buyer of the profitability of your business. An investor will want to know the exact period to recover the initial investment. There is also a comparison between the share capital and the expected net income. It would be best to convince your investor with a realistic business valuation.
The main advantage of ROI-Based valuation is its ease of calculation. The valuation uses simple math from your business balance sheets. You can compare your business and other companies by checking their ROIs. It is easy to gauge the profitability of your business from your investments.
However, ROI-Based valuation has certain limitations. ROI fails to consider the time to get a particular profit. You can have a high yield from a very long period of investment. It isn’t easy to get the actual valuation since different businesses use different calculations. ROI does not take into account the nonfinancial benefits of a company.
Based on your business, Wiley Financial uses accurate and reliable analytical methods for your business valuation in Scottsdale. Contact us today to learn more.