There are certain aspects of a business that can be easily seen and measured. These tangible assets are unambiguous, and making sure they are represented in an accurate business valuation is critical for a multitude of reasons. Business valuations not only guide your business strategy, they are also necessary for tax and financial reporting, as well as for instances when you are planning on buying out a partner or selling the company. It is important to know what your company is worth.
However, you know that the value of your business is more complex than just your property, equipment, assets, working capital, and more. There are other factors that must also be measured in order to have a complete and comprehensive valuation. Is your company known as a stand-out hub for innovative new ideas, products, or services? If your industry is booming and it is anticipated that the market will have a promising future, being a top contender in your industry could increase your company’s value beyond what it might have normally sold for.
Similarly, if you have a very large following of loyal customers and a reputable standing within your community, this can also increase your value. You spent decades cultivating relationships, and if someone is looking to buy your company, they will see this influence and leverage as an investment opportunity. A potential buyer would be willing to pay more for your business over another just because of your well-established history.
The goodwill of a company has a direct impact on its valuation. Yet, these intangible assets are more complex to measure than your tangible assets. To calculate your business’ goodwill, you would determine the fair market price of your liabilities and assets, deduct that number from the final sale price, and what is remaining would be your total goodwill. However, not only is it difficult to know all the factors that could be considered goodwill, it is also difficult to ensure they are accurate. You want to make sure you are not undervaluing yourself, but you have to also make sure your valuation can withstand possible scrutiny in the event you have to deal with legal or insurance disparities.
When you work with a certified business appraiser, you can have peace of mind knowing that all of your tangible and intangible assets can be accurately represented. At Appraisal Economics, we understand all of the aspects that could influence your company’s goodwill and overall value, and our comprehensive reports will provide you with the necessary appraisal documentation to have on hand whenever you may need it.