Why is business valuation necessary in your start-up journey?
Why is business valuation necessary in your start-up journey?
Business owners spend a lot of their time and money to make their venture reach new heights of success.
In this context, one cannot make strategic plans and put their business plans in motion in order to fulfill their long and short-term corporate goals if they do not know where their company stands in the market.
How can a business find out its value?
Business valuation is done by specialists such as Chartered Accountants with the necessary experience.
Why business valuation is important?
According to experts associated with share valuation firms in Mumbai, it is important to know the value of your venture if you wish to:
- raise external capital
- sell a part of your holding in your venture
- buy a stake in another company
- understand how strategic changes could impact the valuation of your business
Another reason to get your business valued is to know that you are not making a bad move while selling your firm or acquiring a company. Business valuation services can also play a vital role in settling legal cases between business partners or stakeholders of a company.
Business valuations can also play an important part in case –
- The business owner decides to donate a share (or shares) of his or her company to a charitable organisation or
- The business owner wants to resolve tax-related or share-holder-related disputes
Company valuation firms in Mumbai are also hired by business owners when they want to raise strategic capital or when they want to apply for a business loan from a leading lender.
How is Business Valued?
Although there are plenty of ways a business can be valued, reputed business valuation firms in Mumbai often stick to the most widely accepted ones like –
Market approach – The value of the company is determined by comparing it to the value of listed companies in its sector. This valuation approach is dependent on market data being reliable and reasonable.
Income approach – The business valuation is derived as a present value of future cash flows expected by the company for a time period of say 5 years followed by a value assigned to perpetuity. This valuation approach is dependent on the company being able to provide robust financial forecasts.
Cost approach – The business valuation is derived as the liquidation value of the business, where the cash the owner of the business will have in their hand after the firm gets liquidated and its liabilities are cleared off, is considered.
Conclusion
It is a good decision for a business owner to hire experts to get their business value estimated but at the same time, one must make sure that the company valuation firm they have chosen has the necessary experience to be able to provide a comprehensive report explaining the valuation and factors underpinning the same. For more details, feel free to send us an email at info@enmglobal.com
