Why Does Your Startup Need a Valuation?
As a startup owner, you are most likely aware of the crucial financial indicators and balances nestled within your company’s financial statements. Having an idea of your company’s cash balances, total assets and annual revenues can provide insight to estimate what your company might be worth. With all of this information at your fingertips, why would you need a valuation from a third-party?
Benefits of Having Your Company Valued
Having a third-party perform a valuation of your company can help you determine a true, impartial value for your company. The valuator is looking at your company from an unbiased view and is able to determine where your company could make some improvements or enhance things you are doing really well. The valuator can also help analyze the validity of the company’s projections to make them more in line with what is trending within the industry and the local economy. Having this third-party view can be advantageous when pitching your company to venture capitalists or other potential investors who will also be analyzing your company’s financial data.
When a Valuation May Be Needed
Below are a few instances that might require a third-party valuation.
Obtain Financing: Startup financing can come from a multitude of resources. No matter where you acquire your funding, though, the lender or investor will most likely request a valuation report from a third-party valuator. Having a valuation report completed before requesting your funding can help streamline processes and facilitate financing discussions.
Gift and Estate Tax Planning: Getting a proper valuation can help reduce tax liabilities associated with gift and estate tax planning.
Mergers and Acquisitions: Knowing the value of your company can help weed out offers that may be too low and help you determine a fair price for your company. Having a third-party value can also help when negotiating potential offers.
Business Transition Planning: Knowing the value of your company before considering possible exit strategies can help narrow down potential transition options and decide what works best for you. It can also determine areas for improvement to help increase your company’s value before you head into negotiations.
Every startup company is unique and will require a third-party valuation for a variety of reasons. But no matter the company, having a third-party valuation on hand can be a great asset to help improve your company’s growth and value. The Anders Startup Group and Forensic and Litigation Services Group can help provide the guidance you need through the valuation process. Contact an Anders advisor to learn about the valuation process for your startup.