A business valuation can be absolutely critical for a variety of reasons, such as for procuring bank loans and courting investors. But there can be times when a business valuation might not adequately reflect the value of a company. Because a business valuation is strictly a number's game, there may be things that have to be done to ensure that the valuation is as high as possible.
1. Trim Off the Dead Weight
There are certain areas of a business that may not be as profitable as others. In fact, there could even be areas of a business that have actually been losing money. Before valuing a company, these areas should be removed. They will very likely be seen as a liability when the business is valued, and they could even reduce the company's overall revenue on paper.
2. Take Stock of Your Human Assets
When companies are valued—especially for sale—human assets become very important. The most talented and critical members of the team must be secured and on-board when the company is valued. In other words, it must be certain that they will be staying with the company. Many businesses make the mistake of focusing solely on their physical infrastructure and their equipment, even though the true value of a business often rests in its talent.
3. Collect On Debts
Collections are an incredibly important aspect of a business. In many cases, collection accounts are valued at a mere percentage of their actual amounts—this is because it's very unlikely that they will ever be recovered. In order to avoid uncollected debts becoming a liability, a business should collect on as many of them as possible and transfer them into cash.
4. Have a Plan for Growth
Companies are only worth as much as their potential. Not only should a business have a solid plan to move forward, but it should also have a plan for expansion and growth. The company's valuation will be based not only on its current revenue prospects, but also its prospects over the next year, three years, or more.
For the most part, improving upon a business valuation usually takes time. But the above methods can be used to get closer to a true value for the company. A consulting firm may also be able to help the company with the improvement of their business valuation, by reviewing the current valuation and identifying areas of improvement. For more information on business valuation, contact a company like The Ostermueller Group.Share