Business Valuation for Small Businesses
Business valuation refers to an official procedure for calculating the net value of any company. Despite which stage of a business cycle you may be at, you are going to benefit from knowing your company value. When you run a small company in Dubai or the UAE, you will find the valuation beneficial as it enables you to learn the most effective ways to bring in investors for fund-raising, or getting the best buyers for your business if you are looking to sell it.
How Is Business Valuation Done?
Regardless of whether you plan on selling your business, having an approximate idea of the total worth of your company is always reassuring. It makes you better equipped to handle your earnings and assets in order to bring about necessary changes. It will prepare you to navigate the sudden market downturn or unprecedented developments. The value stands for your business’s total worth. This business value is determined using a special formula, that will consider your earnings and assets, debts and losses, etc.
How To Determine Business Worth?
- Evaluating the total worth of a company is not as simple as it sounds. The EBITDA represents the total profits while the SDE is Seller’s Discretionary Earnings which owners must calculate for determining the value for a new buyer. This will also cover income reported to the IRS and non-cash expenditures. While large companies use the former for determining business worth, small businesses use the latter as owners often spend for personal benefits.
- Business evaluation is not a cakewalk and it is wise to seek the help of a professional with expertise in this field. You can do a valuation independently, but only after you have carefully arranged the finances. For instance, sellers must have documents like deeds, licenses, profit-and-loss statements, tax filing papers, etc.
- While determining the exact value in terms of a specific number may be difficult, you need to arrive at an approximate figure for the company if you wish to sell it for a profit eventually. This means that knowledge of the liabilities, assets, investment, and other factors is crucial.
- With a proper business plan, you can forecast your future earnings and growth. This information will tell the buyers whether your business has the potential to grow in the future.
- Whether you are buying a company or selling one, you have to research the industry before they take a plunge. An enterprise’s SDE can vary depending on many factors, such as how effective or large its competitors are. This means that in order to sell your business you have to first review others that are almost similar to you in terms of size and business model. When you understand how your peers’ function, you can gauge your potential for growth. This insight will help you impress buyers by telling them why your company is better than the others.
At Viva Consulting we take your business valuation seriously. Call us now link and find out your company’s total worth.