analysis of business valuation implies a certain, relatively labor-intensive process that helps determine the value of the company owner, company or certain enterprises.It may be required in different situations.Evaluation of the market value of the business may be required in a particular case, because the manager must know the figure to make decisions related to the sale or acquisition of property rights.It can be said that such an assessment is the result of work carried out by the company during the whole period of existence.
Features
Business Valuation - a concept, by which is meant to perform certain tasks.
Initially, it consists in the analysis of a controlling stake in a business or company.This task allows you to get a true and accurate representation of the maximum price of the business.
After that assesses the shareholder named minority.Evaluated and complex property.In this case, the business assets given special attention.As such, they are various buildings, structures, networks, vehicles, land and equipment.In addition to the estimated property and financial companies routes.In addition to the above, it is also determined by the market condition and the condition of the discount.This process is referred to as the assessment of the company shares listed on the market.
Business commodity
Business Valuation is carried out and subject to its perception as a commodity.At the opening of the company it invested some capital, which in the future should be returned.Moreover, the object of business valuation, whether a company or enterprise in any industry must be profitable, otherwise it makes no sense to base.Originally known how much income is received, so the opening of any business is a risky undertaking.However, current methods of assessing the cost of the business permit in advance to receive information on future profitability, then you can make a final decision.
Business itself is a certain system that may be implemented in the framework of the market as a separate element of the whole complex or subsystem.Product may be referred to a whole enterprise, or its individual elements.Weight of external and internal factors have an impact on the level of profitability and the needs of a particular case.
External accepted to the unstable economic situation in the country, which is quite often the case.This causes instability of certain businesses.The state is obliged to take this into account in adjusting the business processes.Often, any enterprise is able to affect the market sector or the overall market.Therefore, it is able to have an impact on the economic situation in the country.
importance of assessment activities
Business valuation is a necessary and useful procedure.This may prove some examples of what gives this procedure:
- with the help of business management can become much more efficient;
- with its help you can easily make certain investment decisions;
- by evaluating possible to make a productive business plan;
- by estimating the business can move smoothly to the reorganization of the company;
- it can help to identify the extent to which the firm is creditworthy;
- evaluation allows businesses to make tax optimization.
business valuation methods require several steps.To start collects documentation, giving the necessary information about the company or enterprise.Further analyzes and complete market research, which is based on activities of the company.In the next phase it is time to conduct payment transactions.Next, you need to approve the results obtained as a result of the previous procedure.At the last step being reported, which serves as a measure of business.
Basic techniques
of a company is estimated using three approaches: income, cost and comparative.It is possible to describe each of these outlines, and then examined in more detail.
cost approach involves assessing costs incurred by the business.Very often, the book value of assets does not correspond to the market price.In this case, the assessment of the enterprise is a thorough and detailed re-evaluation.This method has another advantage - it is based on real assets.
Comparative analysis involves comparing the evaluated business with the same company or companies that are present at a given time in the market.Details consumed from transactions involving assets, stock markets and market uptake.
There is also a profitable approach.Business valuation is carried out in this case after the calculation of income expected from the enterprise.The main factor in determining the business valuation to a large extent, a company's profitability.So, the higher the income, the higher the final score is obtained business value.
little history
Valuation of business enterprise can be quite useful not only for the seller and for the buyer.There is a rather interesting information concerning this fact.This applies to those moments that were previously little-known.It is therefore a little dip in the story.
It is difficult to determine exactly when the valuation services in this area have appeared, and who offered them the first time.However, current approaches to business appraisal laid in the twenties of the last century in America.It was at that time in the US went out ban on alcohol products, which we all know that caused the collapse of the alcohol market.At the time, it seemed that in the assessment of business makes no sense, however, the economy would not be the market, if its members are not looking for alternative ways.
estimate the cost of the alcohol business had fairly soon after the "Wine and Spirits" collapse.Many factories that have been engaged in the production of alcoholic beverages, in 1920, received tax breaks from the government for the damage that has been caused to them.Of course, all companies have different sizes, and therefore require different amount of benefits, at the same time everything had to be justified by law, so as not to leave anyone offended.It was at this time and required the valuation of the business.It was then that originated the terms, which are still widely used, such as "goodwill" or the value of the goodwill, which involves an assessment of intangible assets.
These principles take into account the valuation of the business a whole set of factors that give an idea of the future increase in the profitability of certain firms compared with the average of similar companies.Business valuation is required to take into account such important factors as reputation, brand recognition, and other favorable location.Even now, the majority believes that the basis of this study laid such basic concepts as the debt and assets.
But we have grown accustomed to the fact that the evaluation is often represented by a variety of forms, among which the most notable are the measurements of the amount of money and the income derived from this business, entering at the moment and expected in the future.However, when it comes to the value of goodwill, the professionals try to take into account such things as the stability of the composition, the name of the brand, as well as other equally important factors that can greatly affect the final results, which assesses the value of the business.
How have come to believe?
All these findings and innovations have become the basis for that in the twenties in the US was released a memorandum, which set out radically new ideas in business valuation.They concerned and goodwill.It turns out that the modern principles of business valuation laid a century ago, and they were so reasonable that spread around the world, gaining many fans, corrections, improvements, innovations and developments.It turns out that the expert evaluation of business at the moment is an important consideration for companies who care about the profitability of their activities.
So, we can give an example of business valuation, to better understand what is meant by this process.Let's say you are the owner of the shares of some large company A. Of course, you are interested in the value of your stake.To do this, you will read newspapers, study the information on the Internet to get an idea of the value of the shares that would be appropriate to ask if you want to sell the securities.Thus there is no assessment of the business.
In addition, in the case of a private firm, then there is a completely different applicable laws, unfair unknown or inexperienced appraisers.Because of this, quite often there is confusion in the process of assessing the business, as well as errors appear specific to the process.You can list some of the most common myths in this area.
first myth
Valuation of business enterprise should be performed only when he is ready to sell, or the lender is required to carry out this procedure before you apply the property seizure to secure a debt.Of course, this reason is the most common and important.If until this moment had never assessed value of the business, you can be completely sure that the owner is not interested in issues relating to minimizing the cost of the property, planning land ownership, as well as others.If the business needs in the future to generate income, then the owner should be interested in his assessment.
second myth
business owners know that the value of the business in the industry is equal to twice the annual income of the company.Therefore, he is convinced that there is no need to hire an outsider to their assessed value of the business.Of course, these figures do exist, and they are especially common among brokers, economic observers and other specialists, who are accustomed to be averaged lists milestones adhering even in such delicate matters.
But it should be defined and that is hiding under the "average"?This term implies that some of the enterprises is below this level, and the part above.It turns out that generalized statistics are indicators to identify specific outcome, but they can not talk about any specific transaction undertaken.
Every single business is different, so the assessment should be developed for this specific case of using a special project, and not according to some pattern.Otherwise, the probability of disputes, omissions and inaccuracies.
third myth
Competitor sold his business six months ago at a price that is equal to triple annual revenues.Your business is not worse, and therefore a lower price for it, you are ready to install does not.This myth also needs to dispel.Naturally, you need to be confident in yourself and your own business, but what happened six months ago may not be true at the moment.
valuation and cost management business requires to answer several questions:
- What is the profit at the moment?What
- planned profit growth in the future?
- What is the expected profitability of potential customers who have purchased your business?
During the evaluation it is important to be aware, not only in the field of internal losses and income indicators of the company, but in general, the economic situation, both within the country and the whole world.It turns out that the assessment and management of business value involves consideration not only of local indicators and information from accounting, not only data on the nearest competitor, but also a more comprehensive and global facts.
Myth Four
believed that the value of the business is directly dependent on the purpose of evaluation.Naturally, there has been talk endlessly about some one-sided and biased assessments.The fact that the seller will be very advantageous for the customer is unprofitable, and vice versa.
objectives of business valuation are not to provide any benefit a particular person, and do everything objectively.Ideally in conducting qualitative assessment you get a so-called market value of the company.Cost can be called true only in the case where the buyer and seller have information about all ongoing transactions conditions, and know how and what is currently happening in the market.However, none of the parties should enter into a contract under duress.
Only in this case, the valuation of the company's business will allow both sides to learn all that they need.All studies should be relevant to the current situation, as it is an expert opinion would not have anyone to cross.
fifth myth
If the business makes a loss, there is no point in his assessment.In fact, private companies, which are considered in the total weight, may be not very cost effective in comparison with the brethren.When evaluating the study made all the movements of capital company that allows you to see not only the size of profits, but also the profitability of the investment capital.This refers to the ratio of net operating income to average total capital, which is embedded in a company or a certain kind of activity, that is the quotient obtained by dividing the net operating income in the amount of investment.This is a complex issue that can not overpower every businessman.It is for this assessment of the investment value of the business is usually done by third-party companies that specialize in this area for years.
Sold by assessing the business enterprise will be able to convince the buyer to the legitimacy and legal literacy made the transaction, as well as to justify the price he asks.Do not forget only that these activities should be carried out repeatedly.
objectives of business valuation
Here are several of the most significant moments.By means of such an assessment can determine the value of the firm.Many entrepreneurs do not realize how much their business can really cost you.To help in this matter are able to appraisal companies.
Fundamentals of business valuation are such that allow the company to find its niche in which it will be guided well.Every businessman needs to know how things are on the market, as well as how to work colleagues and competitors, which require consumers.That flow of information on the current situation and is one of the responsibilities of firms that are engaged in business valuation.
Assessment and management of business value is needed to identify the current financial position of the company, setting some internal diagnosis to which you want to listen on a mandatory basis, to use the correct methods of treatment or prevention.
honest entrepreneurs interested in such activities, since they not only help to broaden my horizons, but also give an idea of the current situation in commercial circles.Professional assessment of the scope will give you full details on how to change the situation in the country and the world, in your industry, as well as any changes occur in your company, even if it is very conservative.Previously you could set an example for business valuation.
information that is obtained in the course of these activities, is essential to use the courts as well as the regulation of issues that involve taxation or financing.The evaluation can become your reliable witness or an indispensable assistant and consultant.For this purpose it can be used the income approach.
Valuation of business if it is carried out on a regular basis, is useful in situations when you need to take urgent decisions on the purchase, sale go a business combination.
