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    Why Do I Need A Business Valuation?

    1. To Be Prepared for Unsolicited Offers or Unforeseen Events

    These two scenarios reinforce the proposition that a business owner is well served by having a business valuation prepared on a regular basis; the valuation provides information in the event of unsolicited offers or unforeseen events, putting the business owner on a level playing field when having to make important decisions relative to their most important asset.

    2. To Be in a Position of Strength When Negotiating a Sale

    The sale of the business is frequently the single most important financial transaction in the business owner’s life. Potential buyers for the business are typically savvy investment professionals that purchase businesses as a regular aspect of their line of work. In order to level the playing field, the business owner must be armed with all relevant factors that impact the value of the business.

    3. To Manage Tax Transactions Efficiently

    A well-documented business valuation is frequently an integral component of effective tax planning strategies related to a private business.

    4. To Be Armed to Question a Potential Buyer’s Valuation

    A business owner may be offered a high value for the business to grant an exclusive period during due diligence, thus restricting the owner’s ability to negotiate with other buyers.

    5. To Aid in the Avoidance of Buy-Sell Disputes

    For private businesses that have multiple parties that hold equity, the business valuation is a powerful tool to use in the establishment and execution of a buy-sell agreement, minimizing the risk of disputes related to the agreement.

    6. To Protect the Value of the Business

    A well prepared and reported valuation of the business will highlight weaknesses in the business, providing opportunities for business owners to mitigate weaknesses and prevent further erosion of value. Similarly, threats to the business are also identified in the valuation process, providing an opportunity for the business owner to be proactive in meeting those threats.

    7. To Enhance the Performance of the Business

    An annual valuation of the business may be used as a benchmark to assess the performance of the business in its execution of the corporate strategic plan. A series of annual valuations provides objective information to shareholders so that they may evaluate management and make appropriate changes. An annual valuation also provides clear performance metrics and promotes accountability.

    8. To Determine the Return the Business Owner Realizes

    Investment return, or yield, on an investment is determined by two types of return, return on capital (realized capital gains and unrealized appreciation) and return of capital (dividends). In order to determine investment return the value of the investment at the beginning and end of the measurement period is a fundamental input.

    9.To Determine the Optimal Use of Financial Leverage for the Business

    Investment return is also influenced by the level of debt (or financial leverage) used in the business to create the return. The use of even modest levels of debt in the financial management of the business can enhance investment return and reduce risk for the business owner. A business valuation can be a useful resource to determine the prudent use of debt capital for the financial management of the business.

    Asset-Based Approaches

    Essentially, an asset-based business valuation will total up all the investments in the company. Asset-based business valuations can be done in one of two ways:

    Earning Value Approaches

    An earning value approach is based on the idea that a business’s value lies in its ability to produce wealth in the future.

    Market Approach

    Also known as the relative valuation method, it is the most common technique for stock valuation.Comparing the value of the company with similar assets based on important metrics like P/E ratio, P/B ratio, PEG ratio, EV, etc. to evaluate the value of the stock. As companies differ in size, ratios give a better idea about performance. These are different metrics which are used to calculate different parameters of the stock valuation These are different metrics which are used to calculate different parameters of the stock valuation.
    With so many choices; how do you pick a method? Again, the answer isn’t complex, but involves common sense:
    a. What data is available
    b. Appropriateness of the method to the situation, industry, and the business
    c. Level of detail desired
    Often times, value estimates under multiple methods are prepared and the final valuation is taken as the average of each

    Frequently Asked Questions

    Most frequent Questions and Answers

    Yes, Zippyway is an Online Platform serving all over India. Thus, No matter where you doing your business, all you need is Internet Connection on your mobile or desktop and we are ready to get your job done.

    No, You don’t need to be physically present for the process. Zippyway is an Online Catering Platform, all you need is Internet Connection in your device and the required documents with you. We will get the job done even if you are present at the remotest location of India.

    In most of the cases, you will receive the final soft copy of Certificates (or the requisite document) over e-mail and in relevant cases, you will receive the hard copy through the post.

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