Factors That Influence the Value of Your Business
Having your business appraised is a necessary step if you are contemplating trying to sell it. Not surprisingly, a business is a complex asset, and its value will be determined by a number of different factors. Whether you are needing to appraise the business to sell it to a buyer or as part of the process of applying for a loan, knowing the types of factors that can determine the value of your business will help you to be informed when evaluating offers.
Value of Physical Assets
The physical assets of the business will be an important part of its valuation. This is especially true for companies that have highly specialized equipment or custom-made items that are costly. In addition to the equipment that the business owns, the value of the current inventory and supplies as well as the real estate that the company owns will all factor into the appraisal of the firm. Depending on the size of your company and its current financial health, these assets may even make up a bulk of the value of the company.
The Last Several Years of Revenue
Potential buyers of your business will have a strong interest in the recent performance of the company. A company that has a recent history of rising revenues and profits over the last several years will typically be valued better than a business that has experienced a sizable decline in revenue. This will lead to the business appraisers needing to revenue the financial history and records of the business during the previous several years to effectively appraise the value of the firm. It is important to ensure that the information you provide to the appraiser is accurate as attempts to misrepresent the financial status of the company to the appraiser can be extremely unethical, and it is also illegal in many areas.
Size and Expense of Outstanding Debts
The revenue that a business is generating is one of the most important factors in determining its value. However, the debt that it has will also be a factor that buyers will want to consider when making an offer. Otherwise, much of the revenue and profits that the company is generating will have to be used to service large debt payments. When assessing the financial health of a company, the appraiser will consider both the amount of the debt that the company owes and the cost of the debt. Companies that were able to get low-interest rates on their debts may be penalized less than those with higher interest rates when appraising the company.
To learn more, contact business valuation appraisers near you.