External Factors in a Business Valuation

Do you know what your business is worth right now? Practically speaking, it is worth what the highest bidder is willing to pay for it -- no more or no less. Nevertheless, by taking all the relevant factors into account, you can position yourself for the best possible deal.

The first step is to have a business valuation prepared for your company. Our firm can provide a comprehensive report, which can be a starting point for negotiations.

Typically, potential buyers conduct their own due diligence of businesses they are interested in. They may rely on professional appraisers who use different measuring sticks and come up with another valuation. For example, a buyer may seek a valuation based on fair market value, intrinsic value or a different standard might be applied. Internal factors that are unique to the business are taken into account, such as the company's financial position.

At this juncture, other external factors can also come into play. Some of these issues reflect the economy, market demand for the company's products or services, and the health of the industry as a whole. If demand is low, it could suggest reduced profitability. Therefore, it might be advantageous to postpone your plans to sell the business until demand increases or stabilizes.

Interest rates can also affect the value of a business. When interest rates are rising, it can have an adverse effect on cash flow, since outstanding debts can result in higher charges. Therefore, you might want to sell a business when interest rates are relatively low.

Our firm provides a comprehensive set of services relating to business valuations. We can walk you through every step of the process so you understand it completely. Our services include an analysis of:

  • The relative strengths and weakness of your business.
  • Steps you can take to enhance the value.
  • How to keep taxes to a minimum.
  • Where to find potential buyers.
  • The optimal time to sell.
  • The value of tangible assets, such as real estate and equipment, as well as intangible assets, such as
  • patents, trademarks and non-compete agreements.

Contact our office to arrange a meeting. Our business valuation professionals understand the complex internal and external factors involved in valuing a business.

About the Author(s)
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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