Why is a Business Valuation So Important?

Posted by Zelinia Dsouz on July 21st, 2016

The decision of selling a business is always a tough one for business owners. Common reasons to sell are retirement, health issues, wanting to pursue another opportunity or wanting to capitalize on a good competitive market. Obtaining a Business Valuation prior to a Business Sales or Partnership buyout can have many advantages and provide valuable insight.   It can help you identify areas of weakness and provide recommendations on how to improve them and build value in your company for the future.  It can also be used in negotiations when one partner may want to buyout another partner.  These situations can often be very contentious and a neutral valuation can definitely help partners figure out fair and equitable resolution.   

A Business Appraisal can be very useful for Estate Planning Purposes.  It can help with succession planning like passing a business from a parent to a child.  It is also required to have a business valuation when filing an Estate or Gift tax return if the party owned a business.  Many lawyers and financial advisors recommend that their clients get a business appraisal every couple of years.  A professional business valuation or business appraisal firm can help a business owner answer many questions about when or if it makes sense to sell their company.  Many legal situations like death or divorce require a business appraisal if the party was a business owner.  

A professional Business Valuation firm will generally require you to provide three years of financial statements, including Profit and Loss statements and balance sheets, and will need you to answers some key financial and operational questions so they have accurate information to perform the appraisal.  It is important to find a professional and experienced CVA certified firm to prepare the Business Valuation.  When looking for a professional firm, look for a firm that is experience, has done a wide range of valuations for different types of companies and for different purposes.     

About The Author

The author is a blogger. This article is about business valuations for business sales. For more information visit : www.sunbusinessvaluations.com