8 Reasons Why You Should Know the Value of Your Business

8 Reasons Why You Should Know the Value of Your Business

Since the beginning of time, man has thrived for a prosperous lifestyle, making sure all his needs and necessities are fulfilled accordingly. In this race of improvement and betterment, he has looked for opportunities in all walks of life and in all dimensions. This struggle ultimately led him to the realisation point where he understood the true meaning of success, how the only way to balance the equation of success was to equate it with determination and hard work in his professional life. This could be starting up a self-owned business or to work with someone in a company.

A business is an organisation that encompasses the commercial, industrial or professional activities around it. It is an association or ambitious element that provides a ground for occupation and/or trade to the individuals.

Every business, small scale or a large enterprise holds equal importance in terms of its contribution to the economy. One way to look at the true value of a business is to look at its current position and future perspectives regarding its expansion and growth. There are numerous reasons as to why must we know the value and worth of our business, we have highlighted the key reasons below:

  1. Operational Value

Having a large business with steady income is not a proof that the business is doing very well if the real return on capital employed is not determined. This means a business should be able to generate profits more than the return business owner can get if the equivalent money is invested in the bank. Therefore, it is critical to know the value of your business before determining the rate of return.

  1. Selling Proceeds

The basic purpose of doing any business is the income generation or profit maximisation while ensuring a positive investment value in the assets of the business. Therefore, if ever planning to sale out the whole business, it is important to know what you should expect if the business is sold as is.

  1. Investments

Every business requires capital injection during different growth phases. To attract new investors, it is critical for a potential inventor to know the worth of business for both tangible and intangible assets.

  1. Going Concern

To understand how well your business can handle difficult situations and survive, you need to know the value of your business first. Value of your business should be enough to cover all liabilities and cover for unexpected liquidity requirements.

  1. Insurance

Getting insurance cover is important but the coverage amount totally depends on the nature of insurance cover you are getting and the value of your business.

  1. Acquisition Offers

A growing business always deals with acquisition offers and before responding any such offer, one should know the real value of business before making a false decision.

  1. Getting New Debt Finances

Securing credit lines or a new bank loan requires lots of paperwork and other eligibility checks. One of the important things considered by financial institutions is the ability of business to pay back the debt, which can only be assessed based on the value of your business.

  1. Retirement

All businesses are a result of an individual’s passion and hard work over years and; for that individual, business is everything for them. When approaching your retirement age, you should know what to expect in terms of value if your business is sold.

Want to know the value of your business or would you like to know more about succession planning for your retirement? Give AGILIS CA & Advisors a call on 07 3510 1500 to discuss further.

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Agilis Chartered Accountants

Agilis Chartered Accountants provides tailored accounting services, offering clients a high level of personalised advice and support - from individual tax to business consultancy. With a commitment to driving success, we provide comprehensive accounting and advice solutions that ensure every stage of your journey is met with the utmost efficiency. From startup through expansion and growth, our services make it easier for you to achieve business objectives – ultimately leading towards greater financial stability.