The Importance of Business Appraisal Before Selling or Acquiring a Company

What is a Business Appraisal?

Beginner entrepreneurs and experienced business owners often make the same mistake of not understanding the differences between business appraisal vs. business valuation. This is a common situation even among specialists within the industry that can use these terms interchangeably. There are a lot of aspects that are similar and factually the same, but there are still some differences that have to be taken into account. One of them concerns the purpose of a business appraisal that lies within the field of evaluating physical objects - real estate, vehicles, machinery, office equipment, furniture for instance, while business valuation is used to determine the value of other types of assets. Another difference concerns the results of these processes - for the appraisal results are mainly for recommendation and informatory purposes while the valuation can be used for legal matters.

 

By the end of this article we would like to increase your knowledge about the reasons and benefits of getting a business appraisal. And we already can share with you the main piece of advice of a successful endeavor, that all specialists in this industry could agree upon - for the best possible results you should reach out for professional help. For example, at https://www.websiteclosers.com you would be able to find online business brokers and professional appraisers that have different approaches to business valuation depending on the industry and the size of the company.

When should you get your business appraised?

There are several most common reasons to find out the value of the business throughout the life of the company:

  • Changing of the owner. If you are looking to sell your company, or looking for a potential profitable business to buy you definitely should find out the real value of the business before the deal. As neither the present owner nor the future would like to pay more or get paid less for the company - it is a common practice to hire a third party to conduct a business appraisal process.
  • The same rule applies in the case of the mergers. You can create and realize different forms of acquisitions with buying out shares or the assets of one business as long as you have the same understanding of the value of the business you would be able to find a common ground.
  • Also, if you are willing to sell part of your company for investment in development of your business - it is very important to understand the beginning point where your business is at the moment to calculate the right amount of potential investments that you could raise to ensure rapid development in the near future.
  • In case of succession the amount of taxes that should be paid to the government are also calculated based on the value of the company at that particular moment in time.

If you are looking to sell ecommerce business, having an accurate business valuation is crucial. This will allow you to properly price your business and negotiate the best deal.

Factors affecting business appraisal

  • Financial results of the company. It does not always have to be the amount of profit or cash flow. The dynamic of profits and spendings and their expected amount in the future are also key parameters that may change the final number of the business value.
  • In the process of valuation business appraisers pay attention not only to the company and their characteristics but for the whole market itself. Trends in industry may show a massive influence on the value of the particular assets of the company and on the whole company itself.
  • Another aspect that cannot be measured in numbers but still affect the main number - the experience of the management team. If you have a diverse board of directors that have shown incredible skills and talents this would surely boost the final price of the company.
  • Refer a business - to an experienced business valuation company like WebsiteClosers can provide an accurate and comprehensive assessment to help buyers and sellers come to an agreement on price. Their team of experts considers all relevant factors like financials, market trends, management expertise, and client base when determining fair market value.
  • In the modern age where it is more important to keep your current clients loyal than to search for more potential clients - the size of the current client base may influence the decision of the appraiser.



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