Many companies, when asked what their business is worth, will state the amount of their annual turnover. However, there are many contributing factors to the overall value of a business; the yearly profit is just one of the metrics a company should use to determine its worth. Arranging a business valuation by a qualified and knowledgeable accountant is the best way to get an accurate figure representing your company’s value.
What makes up the worth of a company?
A large part of the value is indeed determined by annual turnover: that is, yearly profit minus yearly expenses. If a business was to be taken over, the new buyer would be extremely interested in what they could expect to make per year, and this projected figure will certainly be factored into the offer and sale prices.
However, there are other factors that should also be considered when pricing up a business, such as the company’s owned assets. If business premises are owned rather than leased, if the company owns its own electronic equipment, vehicles, and if there are other material assets to be included in a sale, the valuation of that company should be increased.
It is also important to consider the location of the business, and the population close to it. A competitive environment can push a company’s value down, while a well serviced and busy area might improve its worth. Having a skilled team of staff in place is also an asset to be priced up – as is a strong online presence with e-commerce portals and other web pages.
An accountant will take all these factors and more into account when valuing your company.
Understanding your company’s value
There are many reasons why a business may need to know what its value is. The most common reason is prior to a sale or merger. Valuations are also recommended when companies seek new insurance policies, or when annual taxes are being negotiated. A new valuation should be done whenever significant changes are made to the business – such as the purchase of new assets, moving to a new premises, expansion of services or entering a new market.
Valuations may also be essential where court proceedings are in progress: divorce proceedings are a common reason for valuing companies that are not for sale. Shareholder disputes and share buybacks also benefit from an accurate valuation. A valuation, including future growth projections, can be very persuasive when a company is seeking finance or investment, and it can also work as a bargaining chip when establishing partnerships and mergers.
Arrange a business valuation today
Highwoods & Associates are certified accountants serving businesses and individuals throughout Dartford and Shoreditch. If you would like to know more about our accountancy services, including the Added Value Services at the core of our business, please get in touch today on 0207 979 2000. We can arrange a thorough and accurate valuation of your company and your assets.