Why Valuing Your Business Can Enhance Its Value

There are many reasons why having your business valued makes sense; whether it is to inform sale price negotiations, your financial planning or even succession planning. But one, often underestimated outcome of the process is that it can act as an accelerator for enhancing the value of the business itself by enabling it to make better-informed decisions, helping to ensure that it has the right debt structure and identifying areas of strength and weakness which can then be addressed or enhanced.

The process of a business valuation can lead to a more forensic understanding of your business. It can highlight areas where revenues can be improved and expenses reduced, resulting in higher profits and improved cash flow. Equally, better knowledge means less uncertainty, and less uncertainty in business minimizes a company's risk profile. These two outcomes -- higher profits and cash flow, combined with reduced risk -- in time equals higher business value.

A valuation isn't a simple profit and loss "snapshot"; it is a question of the company's sustained profile over time. Therefore, a valuation can act as a health check; identifying areas of both strength and weakness in the business that can inform strategic planning moving forwards, ultimately enhancing the business' overall value.

A weakness could be identified simply as an area where the business is not performing at its optimum potential, where, for example, operational costs could be reduced or workforce productivity or effectiveness of sales and marketing functions enhanced. A weakness could equally be an area where the company is losing value, for example through poorly managed inventories or customer attrition...

https://www.entrepreneur.com/article/319484

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by Idham Azhari