Financial Advisory
Business Valuation Services
Business valuation is the process of determining the true, fair market value of a business or a company. There are many methods of business valuation available.
Determining the estimated value of a company or business can be a sophisticated, time-consuming, and complicated process.
It takes into account the financial performance of the company over multiple years, market prospects, all tangible and intangible assets, the sector the business is in, the customer base and demographics, intellectual property rights if any, and the company’s location.
Why You Need to Value Your Business
Your business may be worth more than you think. An in-depth understanding of its value could help you exploit a number of value-adding opportunities and maximise its economic potential. Value lies in different assets and investments and could vary considerably in this ever-changing business and regulatory landscape.
Below are the common reasons you need to have the valuation of your business at your fingertips:
- Know your numbers
- To attract investors
- Sale of a Business
- Legal / Tax planning
- Growth/ Business Planning
- To raise capital and apply for bank loans
- Succession Planning/ Transition
- Insurance
Ideally, every Singapore business owner should start valuing his or her business right from the start-up stage. Valuation matters to entrepreneurs because it determines the share of the company they have to give away to an investor in exchange for money. The circumstances of the valuation is a crucial component when it comes to the valuation of a company for purpose of acquisition.
Business Valuation Approaches
Valuation of businesses is a dynamic process, and should not be limited to a single mechanical process. At a strategic level, there are 3 primary approaches to business valuation in Singapore or internationally and our team will advise you on the best approach to achieve your objectives depending on the type of business undergoing valuation.
Market Approach
Few businesses are so niche that they exist in their own space. The Market Approach is the orientation of the value of a business asset based on the selling price of similar units. This valuation approach considers updated sales figures across similar units and calibrate within tolerance for quality or quantity. This approach borrows heavily from the industry performance your business operates in.
Asset Approach
This approach is based on fair market value of the total assets sans total liabilities, also known as the business’s net asset value. This approach takes into consideration the assets that is requires to duplicate the business at the time of the valuation. This approach is paper-leaning as it focuses on assets at hand and cost of recreation, and has a wide tolerance due to the rate of deprecation and selection of assets or liabilities to be included.
Income Approach
This approach has a bundle of sub methodologies including the Direct Capitalization and Discounted Cash Flow methods. The Direct Capitalization method projects the Net Operating Income by multiplying it with the capitalization rate, deriving the present day value.
You should always be mindful of the following when calculating what your business is worth:
- Always factor in the non-financials;
- Subtract the personal expenses and recast the financial statements;
- Apply multiple methodologies to cross-check valuations;
- Enlist a professional so that all sentiments are factored in wisely.
Tianlong Services Can Help You with Your Business Valuation
Our professional valuation services can help your business to keep abreast of changes in accounting standards, establish its value for commercial purposes such as buy/sell transaction pricing, as well as handle internal management information and planning, litigation support and dispute resolution.
