Valuing Your Business? Here Is All You Need to Know

Business valuation is the process of estimating the total economic value of a company through a set of procedures. 

The companies that offer business information services do business valuation and present their observations and data in a report. The business valuation report is a detailed document that holds all the findings regarding the performance and structure of a firm, which gives a clear view of its overall functioning. 

Data accuracy is critically relevant in the valuation process and can make or break your firm’s reputation and performance. Employing the right people is essential for getting precise and timely data regarding a business enterprise. Dun & Bradstreet, the world’s leading data service providers, are the pioneers in providing business valuation services that helped thousands of companies realise their intrinsic business value, enhancing their performance and visibility globally. 

Are you looking forward to valuing your firm? Here we present the why’s, who’s, how’s, and when’s of doing a business valuation.

1. Why?

Most business owners often turn a blind eye toward the business valuation process. The benefits of business valuation are not only limited to taxation, establishing partnerships, investments, and planning exit strategies but also allow you to revamp the business structure and strategies adopted while establishing a firm, which can affect the economic value of your business.

It also gives you an elaborate idea of which business aspects to concentrate on and re-invest more to improve the organisational and market performance, making your business goals more achievable. 

Valuation is vital for initiating new partnerships and buying more shares to expand your business horizon.

2. Who?

Business accountants or a person certified as registered valuers are eligible to do business valuations. Numerous private entities provide business valuation services. It is healthier to reach out to one of those professional and experienced entities to do the business assessment, considering the gravity of the process.

With Dun & Bradstreet, you have access to the most accurate and up-to-date information regarding the business assets and liabilities of the firm, all documented in their comprehensive and data-centred Business Valuation Report, enabling you to make all-efficient business decisions. 

3. How?

The process of business valuation encompasses a set of procedures. There are three major approaches, each having its unique benefits.

• Asset value approaches

Asset-based valuation mainly focuses on a firm’s asset or fair market worth and total assets after deducting liabilities. In short, the calculation is by subtracting the liabilities from assets. In case of merging with another firm, it helps both teams understand the intrinsic value of the business. 

• Income value approaches

This valuation technique works under the notion that a firm’s value lies in its ability to generate income. The calculation involves the division of the total earnings of the company by the number of live shares it owns. Most investors prefer this method due to its flexibility. 

• Market value approaches

The calculation is by valuing the asset based on the market selling price for similar resources. The market value comparison helps to provide an accurate valuation of the firm. 

This method is subjective and can lead to a firm being overvalued or undervalued. 

4. When?

You might need a business valuation in the following cases:

• Mergers and acquisitions
• Business succession/retirement planning
• Taxation
• New partnerships or investments
• Leveraging funds
• Annual update of an employee stock ownership plan (ESOP)
• Buying or selling a business share or firm 

Information Requirements for A Business Valuation

For running a business valuation, the data required includes:

• Company history – including founding date and other events, ownership history, subsidiaries, and affiliates.
• Employee data – data regarding employee positions, wages, benefits, date hired, experience, etc.
• Details of clients and suppliers- information on notable clients and the services offered.
• Products and services- data on products and services offered by the firm. 
  List of competitors- details of primary rivals in the market, competitive advantages, etc.
• Profit and loss statement- details on the financial conditions of the company, recent transactions, etc.
• Tax statement- firm’s tax returns for the last 3-4 years.
• Other data- insurance statements and other data required for due diligence.

Wrapping Up

Valuation of business helps to tidy up the confusion regarding a firm’s asset value, performance level, and visibility in the market. After completing the overall asset valuation, you will know the details you need to work on to improve the performance and visibility of your firm. 

Apply the right strategy and take your business performance and reputation to the next level. Business valuation services offered by Dun & Bradstreet are neutral and comprehensive, allowing you to make suitable and valuable decisions, changing your business course for the better. The D&B valuation report helps an entity to apprehend its overall business value, making room for improvements and growth.