Business Valuation Services in Utah
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Do you need a business valuation in Utah? Business has changed and if you’re a small business owner, you understand this better than most. Many companies are replacing brick-and-mortar costs with a strong online presence. Understanding what your business is worth is more important now than ever before. Only 40% of small businesses are profitable, with 20% failing within the first year. Imagine how many companies could’ve avoided this had they known their business value.
What is a Business Valuation in Utah?
Knowing your numbers is only part of an accurate business valuation in Utah. This process should be an exact science of calculating a business’s economic value for information or sale. Part of this calculation is finding out what a potential investor or buyer will want to know.
We understand that small business owners wear accounting, marketing, and hiring to run a successful business. It’s not easy to take on the additional job of business valuation services on your own. Your business must be ready to sell.
Business Valuation Methods
There are different methods that business valuation companies will use to determine the value of your business. Experts in business valuation in Utah will pay attention to business factors like company leadership, potential future earnings, and the current market value of the company’s assets. While we recommend performing a business valuation regularly, it’s more important to do so when planning your exit strategy using these six methods:
1. Market Capitalization
This is the simplest and most popular form of business valuation services. Market capitalization is calculated by multiplying the company share price by the total outstanding shares. This method is suited well for businesses that have an established and profitable track record. Those companies with larger capitalization are seen as safer investments. Higher market capitalization signifies a more prominent presence in the market. Although young startup companies may have more growth potential, larger companies can take advantage of established brand assets and consistent revenue streams. They are also able to secure financing quicker. In the end, more established companies are seen as less risky.
2. Times Revenue
This business valuation in Utah uses a revenue stream over a specified period and applies a multiplier determined by the industry and economic environment. It is a method used to determine a range of values for a business and is ideal for younger companies that have not yet established a consistent revenue stream or have no earnings. This makes Times Revenue a popular business valuation service for fast-growth startups like software firms. It may not always be the best indicator of business value since revenue does not always indicate profitability.
3. Earnings Multiplier
This business valuation service is more accurate than times revenue since the method adjusts future profits against cash flow that can be invested at the current interest rate. It is also referred to as the price-to-earnings ratio and is beneficial for investors when judging current stock prices against historical stock prices. Since the price of a company’s stock is considered an indicator of its future value, this method is advantageous. However, it is a tool to gauge investments relative, not an absolute stock valuation.
4. Discounted Cash Flow
This method is similar to the earnings multiplier in that it is based on future cash flows. However, this business valuation adjusts cash flows for inflation to accurately predict a company’s present value. It estimates the value of an investment today based on how much that money the investment will produce in the future. Using this method is helpful for business owners and managers who are creating budgets or planning for operating costs. A disadvantage of this method is that it can prove inaccurate since it relies on future cash flows. If you cannot determine future cash flows or the project is too complex, this method is of little help when performing business valuations in Utah.
5. Book Value
This business valuation method reflects the amount shareholders would receive if a company’s assets were liquidated and are usually lower than the company’s market value. Its main uses are twofold. The first is to serve as the total value of a company’s assets should they be liquidated and distributed to shareholders. The second use is for comparison purposes. When the book value is compared to a company’s market value, it can indicate whether the company’s stock is over or underpriced. This calculation does not consider intangible assets like brand value, intellectual property, patents, or human capital.
6. Liquidation Value
This valuation method refers to the net worth of a company’s physical assets should it have to liquidate through a sale. While intangible assets are excluded from this calculation, physical assets include company equipment, inventory, real estate, fixtures, and other tangible assets that may be sold. This calculation is lower than book value but still greater than salvage value and sold at a loss. The seller is usually in a position in which they need to gather as much cash as possible in a short period.
We can help you make sense of your business valuation. Give us a call to discuss these methods today.
Reasons for a Business Valuation
There are many reasons a small business owner would benefit from a business valuation in Utah. An accurate business valuation will be a valuable decision-making tool depending on where you are at in your business and your goals for the next few years. While we recommend always having an idea of what your business is valued at, here are a few specific reasons you may want to consider an accurate business valuation with us:
There’s nothing like having a great handle on your business. Outsourcing business valuation services can help you do that while you focus on other aspects of running your day-to-day activities. It also lets you know how far you’ve come from your company’s inception. This is a great motivator.
It’s helpful to have a baseline of your company and know where you stand in the market. By conducting annual business valuations, you will better understand your company’s potential for growth.
If you’ve been at the helm of your business for decades and are planning an exit strategy, you will have to know your numbers to start the planning process slowly. Waiting until the last minute to do so can be chaotic for both you and your employees. You’ll want to ensure a smooth transition into retirement.
What We Do
Wiley Financial provide accurate and timely business valuations and appraisals in various industries like IT, biomedical, restaurants, etc. You can expect a high degree of integrity and professionalism as we cut through the chaos to find the story your money is trying to tell. Give us a call today at (442)500-4918 to discuss your business valuation in Utah.