Valuation services are very important to business owners, especially in the face of a business deal or an offer concerning the company’s assets.
Many business owners there neglect to seek an actual valuation of their business under the false assumption that their knowledge of their own company is sufficient to make up for it.
What these business owners need to understand is that their estimation as a business owner differs from the company's actual worth in the entire market.
Having the real worth of the company at hand can help paint an accurate picture of its conditions and assets, especially when investors are being sought for the company to aid in its ventures. Investors have a penchant for seeking the valuation reports for the company seeking the investment, so it is better to have a complete valuation beforehand.
Valuers and Appraisers in Bhubaneswar
During times of mergers and acquisitions, valuation plays an important role during the negotiations;
They help to make decisions between the parties seeking the purchase and the ones who need to acquiesce to the demands of the former.
Knowing the value of one's business stops business owners from undervaluing or overvaluing their business in such situations, and the negotiations can be more justified.
Suppose you are an ambitious business owner who has dreams of taking the company to greater heights.
In that case, a proper valuation at the hands of experts can help draft a meticulous growth plan, with which you can have a realistic view of the company's growth as well as its condition and can plan for its future direction.
In addition, valuations help to provide a benchmark for the business in terms of its growth and performance, helping the business owner to know where he stands in the market or the particular field of business amongst his rivals and peers.
Another important aspect is that a thorough valuation can help to point out the flaws or the factors contributing to some of the losses in the business. A plan can be drafted to avoid or lessen the chances of incurring a loss.
A thorough and comprehensive valuation uses the Key Performance Indicators (KPIs) to examine the non-financial aspects of the business in question -
That are the underlying value drivers – for instance, the aspects of corporate structure, client demographics, technology usage, and firm infrastructure are critical for the growth of any business.
Situations requiring a valuation services
Apart from the situations involving investors, mergers and acquisitions, a thorough valuation is required in the situations concerning:
- Divorces between couples, wherein both of them are the joint owners of the business or have a stake over the assets – In cases of marital disputes leading to the dissolution of marriage, the division of assets can be a tricky affair if both halves of the (soon to be former) couple are joint owners of some of the assets or of the company itself. In such situations, a valuation is advised to assess the situation to have a fair division of assets between both parties.
- Passing over shares or assets during the succession of the business – In most family businesses, succession plans (if made) are drafted to either have the spouse or the son/daughter of the business owner succeed. In the case of such situations, a thorough valuation is a must to determine the value of the business or assets in question.
- The succession plans themselves are quite a different matter altogether if we go by the PwC survey undertaken in 2021; only about 34% of the top 500 family-owned businesses in India have a clear-cut succession plan, with only 11% having a robust and documented succession plan.
- Worst, only 17% of these family businesses have a testament or last will, while only 6% of these businesses have an emergency procedure chalked out. With all these issues, an independent valuation is essential for family-owned businesses.
- A formal valuation that takes place on short notice does not give the owners the time to protect, let alone influence, the value of their company. If the valuation is done proactively and regularly, family businesses can solve the issues costing the company in terms of revenue and reputation.
- The onboarding of a new business partner for the company – The inclusion of a new individual for the company's ownership can raise a few queries regarding the percentage of ownership; in such matters, a valuation can give a clear perspective regarding the true value of the assets.
- To levy the tax on the estate concerning the company – Valuation provides an avenue to establish the true worth of the estate belonging to the company and to calculate the tax to be levied. In addition, for a business owner, the true worth of the business typically consists of 50-70% of their personal net worth. More often than not, these business owners fail to diversify the concentrated stock position they hold in their own business. Knowing how the business value impacts your personal financials can help you better plan for your family's future.
- To establish or update the ESOP – The ESOP (Employee Stock Ownership Plan) is an employee benefit plan through which employees can acquire stocks or ownership of the company. It can be a very useful tool to retain employees who are valuable or essential to the company. The ESOP can be updated by conducting the company's valuation to contribute to the company and its employees.
- To secure the capital for the company – If you, as a business owner, are considering borrowing capital for an acquisition or any other business investment, the lending institution or entity would want to know the type of leverage lying in your business. The thorough valuation of the company is the first step in the process of securing capital.
Apart from all these situations, if you, as an ambitious business owner, have yet to get a valuation done for your business for more than a year, it's high time to get one done.
Regular valuation is found to be highly effective in managing the business and executing the short-term as well as the long-term goals set by the business owner.
After all, the purpose of a valuation is to assess the effectiveness of the strategic decision-making process and enable the business owner to track the company's performance in terms of the estimated change in value, not just in revenue.
Having a proper valuation in an early stage, before the situations mentioned above, makes the involved parties familiar with the whole process; hence they will have more clarity with the valuation.
When there are sudden emergencies (bankruptcy of the company, sudden resignation of a shareholder, sudden death of the shareholder), rather than scrambling around, the concerned parties can formulate a plan for the future with the help of the valuation reports.
The subsequent valuations, if conducted regularly, would be less time-consuming and reasonable as compared to the sudden valuation undertaken in emergencies.
With a team of accredited, efficient and trained professionals all over the globe, Especia endeavours to help enterprises be more competitive and attain their goals in record time.
The company has succeeded in giving the best services to the increasing number of customers from not only india but also from US, Canada, UK, Australia, Germany, France, Norway, Switzerland, and the Middle East.