Business Valuation & Financial Restructuring

A business entity is incorporated to deliver either goods or services. Down the line of continuous delivery of earnings, it possesses a value for itself in the eyes of its stakeholders. In business language, we can say that the value that the entity holds is known as business valuation. In other words, business valuation is an approach to know the true worth of an organization. If you are an owner of a business entity, you should be aware of your business value in the current market, and failure to do so will wipe your business out of the competition. So, you have got a basic idea of what business valuation is all about. Now, let’s understand how business valuation works, why is it required, how it can change your business and leverage towards growth.

Why Accounting Software?

The key drivers of business valuation are assets, liabilities, income, management, and location. To determine the value of your business, you need to follow any of the business valuation methods. These are also known as business valuation models that help you to understand the worth of your business. Business valuation models include the following approaches:

How is Business Valuation Calculated?

The key drivers of business valuation are assets, liabilities, income, management, and location. To determine the value of your business, you need to follow any of the business valuation methods. These are also known as business valuation models that help you to understand the worth of your business. Business valuation models include the following approaches:

1. Asset-Based Approach

This approach of determining the business value totals up all the investment. This approach can be done on a going-concern basis, or a liquidation basis. Applying this technique to a corporation serves well as it will be included in company sale, whereas applying the same to a sole proprietorship becomes difficult as the assets belong to the same owner and separating them for business and personal use becomes a challenge.

2. Earning/Income-Based Approach

This method believes in the fact that a business’s true value lies in building wealth for the future. Keeping this in mind, a valuator determines the future cash flow by examining the past records and also determines the future financial risk.

3. Market Value Approach

This approach compares the value of one’s business to similar businesses that have recently sold. This approach can be applied only when there is a sufficient number of competitors in the market.

What Are the Documents Required for Business Valuation Calculation?

The process of business valuation can be done upon submitting the essential documents pertaining to a business entity. The essential documents include:

  • Registration and license documents
  • Last 2-5 years audited/unaudited financial statements
  • Business plans/budget for next 3-7 years (we can assist)
  • List of clients/suppliers
  • Tax returns
  • Loan documents for key loans
  • Payables and receivables report
  • Details of major contracts
  • Lease documents
  • Inventory reports
  • Staff details

Why is Business Valuation Essential for a Business?

Any business requires a business valuation to understand their company’s worth. Let’s have a look at the reasons why the valuation process is instrumental:

1. Helps to Enhance and Evaluate Your Business

Business valuation helps you to gain a clear idea of your business. It helps in increasing the goodwill and evaluate the present value according to the market conditions.

2. Beneficial during Mergers and Acquisitions

Merger & acquisition strategy evaluates the value of any business at the first place itself. Proper financial recordset and business valuation would help your business to have an upper-hand over other business at the time of merger or acquisition.

3. Acts as a Magnet for Investors

Any investor does investment expecting a higher rate of return on the investment made. Since business valuation presents the company’s worth, it would attract investors towards your business to a great extent.

4. Decision-Making Tool

Valuation reports act as a decision-making tool. It would help you to take long-term decisions regarding your business development.

5. Knowledge of Business Assets

During the business valuation process, the value of asset possessed by the organization is determined. This helps in gaining insights into the nature and value of business assets.

6. Easier Loan Proposal

Possessing knowledge about your company’s worth will help you to grab an easy loan from the market for future expansion.

7. Company Restructuring

Business valuation reports contain the core details of company assets and liabilities. They contain the company’s present worth and ultimately this helps in restructuring the company as and when required.

JAXA Business Valuation Services

At JAXA, we understand the complex process of business valuation. Keeping this in mind, we provide a wide range of business evaluation services to simplify the process so that it becomes easier for you to understand the true value of your business. Some of our services include:

  • Establishing business valuation models
  • Strategizing business decisions and planning
  • Delivering business restructuring services and procedures
  • Preparing business valuation reports
  • Providing a framework for business operation
  • Advising to maximize business profit
  • Tracking the cash flow of business

Why JAXA?

We provide complete assistance in the business valuation process of a company. We regularly work with different business entities spread across worldwide. Our team consists of business valuation experts who hold industry experts and document the accurate business reports, followed by best practices for your business to maximize the profit. If you are planning for succession, selling of your company, litigation etc. we do take care of your concerns. To proceed to the next step, do contact us. We would be glad to assist you.

FAQs

What is an on-going asset-based approach?

It is one of the ways under the asset-based approach of business valuation. Here, the net business value is arrived by subtracting the total value of liabilities from the total value of assets possessed.

What is the liquidation asset-based approach?

This is another way under the asset-based approach of business valuation. The net value that a business will receive if all the assets are liquidated and liabilities are paid during the current scenario.

What is Discounted Cash Flow (DCF)?

It is one of the methods of valuing a project using the time value of money concept. It is done to estimate and attract the investment opportunity. This is a backward approach wherein the future price is projected and discounted in order to arrive at the present price estimate.

What is a non-compete agreement?

It is a type of agreement that takes place between an employer and an employee. The main idea behind this is that the employee agrees not to compete with the employer for a certain duration within a specific geographical area.