Why Value the Business?

Valuing a Business

1. Why Value the Business?
There are four main reasons for valuing a business.

1.1 To help you buy or sell a business.

Understanding the valuation process can help you to:

There is a better chance of a sale being completed if both the buyer and seller start with realistic expectations.

•Improve the business' real or perceived value.
•Choose a good time to buy or sell.
•Negotiate better terms.
•Complete a purchase more quickly.

1.2 To raise equity capital.

•A valuation can help you agree a price for the new shares being issued.

1.3 To create an internal market for shares.

•A valuation can help you to buy and sell shares in a business at a fair price.

1.4 To motivate management. Regular valuation is a good discipline. It can:

•Provide a measurement and incentive for management performance.
•Focus management on important issues.
•Identify areas of the business which need to be changed.

http://www.is4profit.com/business-advice/finance-and-money/valuing-a-business/why-value-the-business.html