Posted by Cedric Joshua Martinez
Feb 18, 2015
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Starting a company is more than just being able to comply with requirements. It requires planning ahead, setting goals and working towards those goals. In this regard, valuation plays a central role as it allows companies to know what their current value is and identify realistic goals from there.
In fact, in one of his many speeches, Warren Buffet was quoted when he said that business schools should focus more on teaching company owners about valuation.
Read: 8 Methods to Managing Financial Risks your Business may Face
Now, while this simple statement emphasizes the need to assess the real value of your company, it does not explain why valuation is indeed important for achieving success. Here are some points to consider in helping you understand why valuation is important for your business:
Sales Prospects
Knowing the economic value of your business is vital when you are seriously considering the possibility of selling your business. These exit strategies demand that you know the accurate net worth of your business in order to calculate the best price that you should sell it for, interest included. Failing to undertake valuation initiatives for your business will put your potential wealth generation strategies at risk.
Business Planning
Mapping out your business plans requires you to maximize the use of all your available resources. Since the value of your business is a major focal point in the computation of your assets, you should exert serious efforts to include your company’s net worth in your business financial plans. You can only do that if you are thoroughly aware of the economic viability of your business.
Tax Compliance
The Australian Tax Office (ATO) reinforces strict rules to ensure compliance among Australian business owners. Since your company’s actual financial position is part of the ATO’s calculation for your tax bills, you are obliged to undergo business valuation to keep your books in order. In the long run, these will all make your tax compliance initiatives easier to address.
Resolving Shareholder Disputes
Every now and then, business owners encounter disputes with their shareholders. One of the more effective ways to resolve such issues is to assess the actual financial position of your business through valuation.
Business valuation will give you the proper perspective when it comes to the complicated process of resolving critical issues with shareholders.
Additional Funding
In many instances, valuation has helped many businesses to acquire additional working capital for their enterprise. By thoroughly assessing the actual net worth of your company, it will be easier for you to seek additional funding from potential investors. A glimpse at the actual value of your business will spell the difference between an investor’s ‘yes’ or ‘no’.
Doing a proper valuation is important for your company in many ways. Admittedly though, knowing the accurate net worth of your company involves a long and tedious process. The good news is you can always seek help from experts to get your valuation requirements out of the way.
Read Next: How Offshore Accounting Helps You Become Globally Competitive
Need Help in Managing your Company’s Finances?
When it comes to managing your company’s finances and handling your financial requirements properly, finance and accounting professionals are the best choice to do this.
Here, you have two options: hire an in-house accountant or outsource a business accounting service. You can check out our blogs if you want to know more about outsourcing your functions to a reliable partner.
You can also grab a copy of our whitepaper Outsourcing: How to Make it Work to know how we can make outsourcing engagement work for your company.
This post was first published on 18 February 2015 and edited 07 June 2024. Edited by: Aly Tagamolila
