If you’re looking to secure business funding for your multi-million dollar company, then you’ve almost certainly made the decision to have a business valuation done, and done by an independent company. Great, but now you can’t help but be a little nervous. You’re an open, honest person, but is this going to get really personal? What kind of questions are these people going to ask?
That depends entirely on the people you brought in to help you. So, before you do hire someone on to do an independent business valuation on your company, you need to make sure that you can trust them. This is actually easier than you think. If you’re running your own company, then you almost certainly have contacts who you can ask. It’s those people on your contact list that are going to be very important to you now. They are the ones that can recommend a good company to do the independent valuation and you can ask others about the company’s reputation as well. That isn’t the end of it, though. Trusted friends’ recommendations go a long way, but it’s also wise to do some research as well to ensure you’ve made the right choice.
Now that you do have people to do the valuation, what are they going to ask you? The answer is that they’re going to ask some pretty standard questions, but it is better to have what they need ready, rather than say “I’ll have to get back to you on that!”. Their time is precious, and the more time it takes for you to get the answers, the more money it’s going to cost you.
So here are the basics as to what an independent company will ask you:
First, they’re going to need a full report on your past sales. They will also want to know what your future projections are going to be. Are sales going to go up or are they going to go down? A downward projection will certainly have an effect on your valuation. They’re also going to want to know what the profits are on those sales, and in general. Profit margins are always important, as you’ve probably discovered yourself. You should also have a list of tangible assets available for review. This one is a no-brainer. People need to know what the company is worth if you suddenly had to sell everything, which could happen for any one of a hundred reasons. Customer loyalty and consumer growth are also things they will take into account, and any documentation you have in those areas will be most welcome. The last two important issues for a valuation is to know what your competition is like. Do you face fierce competition from them? Do you have few or many competitors? Lastly, they will need to know if there are any risks facing the company that they need to know about.
And, that’s it! Overall, it’s a pretty straightforward process, with little to worry about, if you’re properly prepared!
