There are good reasons why you should know what your business is worth. Following are some examples you may not have thought about. Personal and professional circumstances can also change. Business valuations matter.
- This helps when you are trying to raise capital.
- Knowing your business’s value helps you understand its strengths and weaknesses.
- You are selling your business to a third party.
- Litigation like divorce proceedings is forcing you to sell.
Traditionally it is assumed by many business owners valuations relate to property valuation be it Residential, Commercial, Industrial, or Portfolio (different assets contained within one overall portfolio). It is often a misunderstood exercise and in some cases looked upon as an unnecessary expense. But in fact, there are several reasons why there is a need for a comprehensive good asset valuation. It is important to understand the valuation process to determine that the correct market value/market rent for an asset is reported, paid, or received.
Many businesses may at some point rely on external funding to assist their operations. Most lenders such as banks or other special-purpose funding vehicles may seek an accurate valuation as part of their lending compliance terms and conditions.
Lenders will want to carry out their own independent valuations, so it is worth understanding what your business and assets are worth. Doing your own valuation is equally as important. This could help speed up lending approval and show the lender you have carried out your own due diligence which helps both parties align expectations quickly allowing you to concentrate on growing and scaling your business with minimal delays. You can also use your own valuation to negotiate with a lender’s valuation which you may feel is undervaluing your business.
Auditing & Accounting
Annual Property or Asset valuations for auditing purposes can be or are required to help understand what values to include within your company’s financial statements. You may need to submit these each quarter or annually within a company group structure. Asset valuations can change quickly. Your assets can be worth X Dirhams one month and 3 months later hopefully more or sometimes less than you thought.
An individual or firm would request for the basis of value to be undertaken to “Fair Value” which is compliant with International Financial Reporting Standards (IFRS). Another common basis of value includes Market Value and Market Rent which are internationally recognized.
Sale of a business and transfer of ownership.
Business owners want to know what their companies are worth. And the same goes for those who want to buy a business. You might want to buy one of your partners out or just sell the company.
You can’t guess what your business is worth. You may overvalue or undervalue so you need an accurate business valuation for the market value. That’s important. Business valuation is the process of determining what your business is worth. It involves fair market value.
When an asset is on lease and the contract is about to end, knowing the real market valuation of any asset which you may be leasing will assist in your negotiations possibly resulting in a lower leasehold agreement.
Your lease often includes coverage for repair liabilities and if the landlord wants to make a claim for any dilapidations, negotiations against this amount can be secured if you have the asset valued.
The summary above gives you a broader understanding of the benefits of a professional industry-approved valuation. The team at Windmills Group can help you understand further what will benefit your business and financial needs and can offer the technical support to meet this. Send us your inquiry. All you need is just one click away.