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Determining the Value of Your Business

Aug 8, 2008
Owning and operating a company can be a difficult and tricky endeavor, from maintaining a customer base and personnel, to operating every single financial aspect of the company - from taxes and fees to everyday costs including office expenses, salaries, and premises rentals. The difficulties involved in owning and operating a business are far more than simply having a good idea and running with it. A responsible entrepreneur owes it to himself, his investors, and his patrons to take care of the financial aspects to ensure the best possible end-game scenario.

Business valuation is one service that can help you in your efforts to keep the financial tangles of your company up to par. A valuation can be very useful when trying to calculate net worth for the purposes of taxes, etc. but it can also make all the difference in determining sale price, should you try to either unload your business, or complete your investment by selling it at its peak. A miscalculation in a valuation could conceivably cost you thousands or millions of dollars - something that neither you nor your stock holders would find easy to forget.

Additionally, valuation services could prove useful in less ideal circumstances, such as a lawsuit or bankruptcy case that would require you to account for the value of your business in order to correctly settle the bankruptcy or to litigation matter. Again, a bad calculation could end up causing severe consequences and making your life much more difficult.

Regardless of your reasons for getting a valuation, it must meet two criteria in order to be successful. First, and most simply, it must be accurate. Accurately calculating the value of your company can make things a lot easier, but providing an inaccurate assessment could make things much more difficult - whether it be pertaining to sale price, bankruptcy claims, or tax offerings.

Secondly, it must be researched thoroughly enough that the conclusions of the valuation can be defended under criticism and litigation. When selling a company, this could eliminate a great deal of stress and keep the process moving much more quickly, while in a litigation or bankruptcy case, this can help you defend the valuation of your business to prevent a drawn-out litigation process and to protect your assets even further.

To meet these two criteria, experienced professionals with degrees in related fields should be the ones creating the valuations. For example, accountants, economists, financiers and businessmen could all bring useful skills to the process of evaluating a business.

With the right experience and skills, business valuators should be able to serve many different kinds of companies, whether larger or small, public or private. Do your research, and find the right business valuation company for your needs - you can't afford not to.
About the Author
Art Gib is a freelance writer and Hempstead & Co. is a leading online provider of business valuation and other business legal services.
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