Companies often seek additional investment from outside when they want to fund their growth or save it from financial collapse. However, an investor may ask you to see a full valuation report of your company. Potential investors will also ask you to provide a valuation projection based on their provided funding. They ask for such reports as investors want to know where their money is going and how it will provide them with a return on the investment. You will succeed in attracting the attention of potential investors when they can see that their funds will carry the company to the next level, increase its value, and put more money back into their products.
What Should be the Frequency of Conducting a Valuation?
Once you determine the business valuation for your company, it’s time to set new goals to increase its value in the coming year. Every year you should set aside time to compare the valuations of the previous years to gauge growth and losses and identify where the scope for improvement is. Conducting a business valuation annually is advisable for you as knowing the worth of each component of your business is critical to make informed decisions. The formula is quite simple: business value equals assets minus liabilities. Your business assets include anything that has value that can be converted to cash, like real estate, equipment or inventory. Liabilities include business debts, like a commercial mortgage or bank loan taken out to purchase capital equipment.
