Business Valuation Myths Summary Paper

There are many myths behind business valuations. These myths need to be unmasked so that you know exactly what you can expect from a valuation. It is necessary to conduct a business valuation whether you own a small or big enterprise.
Here are four myths associated to business valuation that you should be aware off before putting your trust in a valuation company:
1. No money equals no value: this is not the case at all. Even if your business has taken a knock due to economic reasons it will still have generated some form of income over the past financial year. The valuator will take all of this into consideration while conducting the valuation. They will go into the financial history and have conversations with all the relevant people to find out exactly how your business has been performing.
2. Comparison to another business: all businesses are different, even if you work in the same field. Just because a business similar to yours sells for four or five times more than their revenue does not mean that your business will be able to do the same. All aspects of the business, as an entity, are taken into consideration. Your business might outperform others in many ways but also may not have as much to offer. You cannot assume that your business will subsequently sell for the same value as another similar to yours.
3. The valuation cannot provide an accurate sell value: in most cases the valuation will provide you with an accurate sell value of your business. Again many factors are taken into consideration, but in general the Fair Market Value that is produced at the end of the valuation will provide an accurate value. This value is accepted by most property buyers. Regardless of the price most property buyers will try to negotiate for a better price, which is why property is first put on the market at a higher but not unrealistic value.
4. The rule of thumb: unfortunately the rule of thumb does not apply when it comes to valuation. Just like you cannot assume that your business will sell at a certain price, you cannot assume that it will be valued at a certain price. There are many factors that are taken into consideration while the valuation takes place. Your assets, the area you are situated in, and the building as a whole will be taken into consideration.
These are the myths that you need to be aware of so that you have realistic expectations. It is essential for you to do a valuation on your business so that you can prepare your business accordingly. Insuring for the right price, applying for a loan and doing your taxes will become far easier once you know exactly what your business is valued at.

Here at The Property Partnership we can supply you with a fantastic valuation service. All you need to do is get in contact with us for a hassle free quote. Visit our website http://www.tpp.co.za to get in contact with us today

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