Business Advice & Corporate Finance

There are different methods to valuing a business and getting it right makes all the difference when looking for investors.  If you value your business correctly, it can instil confidence in potential investors, whereas a poor valuation will act as a deterrent.  Banks Sheridan can help you assess your business worth and calculate the best valuation for your business.

Here are the main methods of valuation:

Net Assets – this is the simplest method of valuation – take a look at your balance sheet and take your ‘tangible’ assets minus your liabilities.  Tangible assets are things you can touch physically, for example, stock, equipment etc.  This valuation method will result in the lowest valuation, as it does not take into consideration ‘intangible’ assets (things that are not physical), such as goodwill (the difference between what the market may pay and the value of the net assets), brand identity or intellectual property.

Price/Earnings Ratio – this method is best suited for businesses who continually make a good profit.  ‘Normalised’ profit (adjusted for any one-off/extraordinary events) is multiplied by the P/E ratio.  This ratio is dependant on many factors, including the type of industry your business is in.

Net Present Value – this method calculates the future stream of cashflows at today’s value (present value).  The future cashflows are adjusted by a discounted interest rate and is affected by the minimum acceptable rate of return of the investment (purchase of the business).  This can be a complex method of valuing your business as it is reliant upon assumptions about future cashflows.

Comparable market value – this method considers what comparable businesses have been sold for in recent times.

Planning is key when selling your business and there are many things to consider before you are ready to make your sale a success.

Contact us for more information.

An accountant can assist in many ways, from making sure the correct business structure is put in place to providing the best tax advice, by providing advice on improving the financial health of a business or by managing the entire financial function to allow a small business owner to concentrate on the business’s core activities.

Our friendly and experienced team at Banks Sheridan work in partnership with you to provide the care your business needs every day.

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