Why an annual valuation of your business is important?

Some people get fooled by the sparkle in stone and mistake it for a diamond, while others are at times too ignorant to look past the dullness of coal to see the diamond that may be emerging. Similarly, unless you get your business valued, you may never truly know its worth. Getting your business appraised by a talented appraiser is a very crucial step in managing any profitable business, no matter what the end goal is. You may assume that accounting, keeping scores and managing well may be enough but valuation and accounting firm are necessary.

A lot of people, while agreeing with the importance of valuation, neglect to get it done as often as necessary, thus missing out on the true benefits that valuation. Accounting in the rapid pace at which the world is always changing, the unpredictability of events, etc., an annual valuation is highly necessary for your business. You may be content with the valuation and accounting firm numbers you saw once and thus find it unnecessary to repeat the procedure each year, especially if you don’t think your business has evolved enough in the given time span. To help clear this misconception, here are some arguments that are sure to change your mind.

Unpredictability of life

You may be leading the best accounting firm and have all a solution for every problem but when it comes to the wheel of fate, you never really know what you may get. If your death or disease leave your family without a provider, then an up to date valuation will surely go a long way in easing the process of sale and dissolution of your business.

When opportunity knocks

“Luck Is What Happens When Preparation Meets Opportunity.” In the business world, everything moves fast, and a deal that comes your way can disappear in the blink of an eye if you hesitate to accept. If you’re offered a selling or buying offer, then the parties involved would prefer that your valuation is ready and as recent as possible.

Furthermore, you may come across or be looking for a partner to take on. In such scenarios, an annually updated valuation and accounting firm will enable you to decide the best possible buy-in price. Additionally, the new coming party would also be impressed by a valuation that is up to date as it would help them conclude if the price being offered is reasonable or not.

Expanding/closing the business

If you plan to retire soon, then you’re probably thinking of closing down or handing over the business. If you plan to sell, then an annual evaluation will guarantee that you do not suffer a loss, while in case of handing it over, you can rest assured that the new management will know where they stand and how to take the company forward from this point.

If your aim for the company is an expansion, then you will surely need some capital for it. The bank and investors are a great source for this but don’t expect to impress either of them with an old valuation. After all, why should they trust you to lead the company forward if you don’t even know where your company stands at the moment.

Self-evaluation

You may have limited evaluation of accounting since business is based on the exchange of money. But having a complete and recent valuation enables you to see how much your valuation has changed from the last year, what may be some causes behind it and how to cope with it.

e.g., if a disaster situation occurs then having a recent valuation at hand can help you identify the exact nature of loss thus giving you an aim to set and serving as a motivation of where you once were.

Legal issues

Issues such as divorce may bring your business into the court, and the first thing to be established will be its value. To avoid getting a valuation made in a hurry or by an unaccomplished person, it is best to have such documents prepared beforehand.

In conclusion, an annual valuation of your business is necessary for every type of business, regardless of the direction it wants to head.