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Why A Business Owner Needs A Professional Business Valuation

A professional business valuation provides a business owner with multiple facts and figures regarding the actual worth or value of their company in terms of market competition, asset values and income values. It is the result of determining the monetary value of a business, using objective metrics and other value identifiers.

Here are a few of the key reasons why business owners need a professional business valuation:

  • Helps determine market value and the selling price of the business
  • Identifies the total fair market value of the business with:
    • Separate value for tangible assets of the business
    • Separate value for intangible assets of the business
  • Enables a business owner to price the business with confidence when putting it on the market for sale
  • Provides the business owner with information as to how a prospective buyer might expect to finance the purchase of the business

It is also worth noting that professional business valuation reports are typically formatted to be SBA compliant and will only require a minimal update (by the lender) when used as part of an SBA loan. In short, being able to supply an SBA lender with a justification of the value of the business, as described in the valuation report, will usually enable the lender to move forward more quickly when reviewing a buyer’s SBA loan application.

Most business owners, lenders and other financial professionals understand that while there is a set of common, non-negotiable factors that go into the valuation equation, other factors (and the weight assigned to them) will vary by industry, business structure, and other individual characteristics of the business under review, as the business valuator comes to a conclusion of value and puts together the valuation report that will be provided to the business owner.

When all is said and done, the primary goal of a professional business valuation is to provide an indication of value, as well as to defend and explain how the valuator came to that particular conclusion of value.

Excelsior Business Group (October, 2022)t