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How do you go about valuing your company?

By rosieseldon, March 18, 2019 | Business

Read on to learn about the benefits of company valuation and the type of companies which will benefit most from the process.

 

How does a business go about a valuation and what are some of the common challenges business owners face?

Many SMEs would like to raise investment but may be missing some of the critical components needed to progress. To be a viable investment, your company must have the proper financial reports in place and be on top of its VAT reporting.

And then there is the perennial challenge for all entrepreneurs which is finding the time to devote to finance when they are working so hard to run the business and manage a team. As a result they can struggle to attract the investors they need, are unable to secure investment and find their ability to grow is severely restricted.

Overall these are common challenges and can trap some companies in a cycle. However, pulling in some interim strategic support to set up a financial reporting framework, tracking your profit and loss and creating a five year financial plan can be worth its weight in gold!

These financial tools are the building blocks of any accurate company valuation and eagle-eyed investors will be looking for these practices as evidence of your business’ credibility.

So once a business has its financial reporting systems in place, what are the next steps?

There is a five-step system to follow. Obviously, the last step is the deal which involves sourcing investors and negotiations between the buyer and owner. Before starting to find investors, it is important to have a clear understanding of how much your company is worth, to get a valuation. To do this, you need to analyse your finances to identify trends and create a five year financial plan.

Step 4 involves securing finance to grow, or finance to sell, or merge your company. And finally you have the deal itself where you both source and present to investors.

These two last steps stand on the foundation of accounting, financial reporting and financial planning. Without this foundation, many companies struggle to find the right investors and they cannot sell their company for its maximum value.

While Accounting, Financial Reporting, and Financial planning seem mundane, they are the most important steps. These are the steps that will put your business at the forefront of the market.

At Advisors M.E. we can effectively help you to grow your company. Talk to us about how you can evaluate your capital, consider loans from a bank, or bring on investors. We will go through each of the steps with you to ensure the most accurate valuation possible. To find out how best to grow and value your company, contact info@advisorsme.com or call 025515996.

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