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The Value of Business Valuations

A business valuation is far more than just some number you should have on hand. It can be a meter of your company’s success (or failure), and in many cases, it can be a vital figure that helps determine not just how big you are now, but how big you’ll be capable of becoming.

A professional can calculate a business valuation in several ways, but it all boils down to one signal purpose: determining the worth of your business. Depending on the stage of your life of business, and what you plan on doing next, you might consider one of the following:

  • Asset Valuation: This is probably the simplest type of valuation to understand. It involves tallying up your assets and measuring them against your liabilities. The devil is in the details, though, because you have to determine how to actually assign worth to assets and liabilities. And it can be difficult to account for things, such as the worth of a brilliant engineer.
  • Income Valuation: This type of business valuation focuses on what the business can reasonably expect to earn in the future. It involves measuring a number of areas of the business to determine, say, future earnings or future cash flows, then using one of a few methods to determine the ultimate value of your company.
  • Market Valuation: You could try to guess what your business is worth based on your own evaluations and math. However, a market valuation takes into consideration what businesses similar to yours are worth – how much they have been bought for and sold for.

But why would you even need a business valuation first place?

In many cases, your company’s value will have a significant say in how much you’re able to raise to keep growing your business. For instance, early-stage investors will likely want revenue and earnings projections to determine how much they plan to invest in you, as well as what size stake they can expect for contributing to the cause. And banks will want to know how much your company is worth before they provide you with a loan.

Business valuations even matter on the way out. If you plan on handing over the reins and moving on to the next stage of your career or even retiring – and if the plan is to sell the business to help fund that next stage – you’ll need a reliable measure of your company’s worth so you have something for the negotiating table.

McMananon & Co. has provided business valuations to small and midsize businesses for years, and can give you the financial lay of your land no matter what your situation. Perhaps most importantly, we can provide you with accurate numbers so you and other parties can trust every step that comes afterward. After all, an inflated valuation might make you feel good, but it could turn away would-be investors and buyers who do their own due diligence.

If you need to know what your business is worth, call us at 440.892.8900 or get in touch online.

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