Business Valuation is an activity normally associated with an established business, not a start-up. However, even a brand new business has a measurable value. Completing a business valuation sets a benchmark and a starting point for evaluating future company growth. It is very tempting to be optimistic when starting a new business. An independent valuation can help keep your stated value realistic.
If an evaluation is completed annually, it can be compared to your projections and help you make decisions about needed adjustments to your business plan. When you need to speak to investors, the business valuation will let you have concrete information to share. Many authors and financial advisors suggest completing an Asset Valuation, a Market Demand, and an Income Valuation. Consistently evaluating these reports will help you have a better understanding of your company’s growth and potential.
It is more difficult for a service-oriented business with no employees to document value. However, a service business still needs to be prepared to state the value of their business for potential investors or future owners. Budgeting for (and preparing) an annual evaluation is a good business practice.