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Businesses appraisals are simply the economic analysis or professional engagement to execute business valuation in order to find out the actual worth of the business, certain business assets or professional practice. They are vital tool in arsenal of any business owner and need to be taken into account from the very start throughout the lifecycle of the business.
There are great reasons for why it’s important to get certified business appraisal and these are.
Reason number 1. The fact that your business is in startup phase, you should value it in order to know how much of it must be given to your investors in exchange for the seed money.
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Reason number 2. If you have established your business and have to provide either quarterly or yearly updates to investors or stakeholders, then this can give them with a clearer picture of the business’ financial status. For this, it is going to show them the actual worth of the investment they made.
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Reason number 3. There’s a chance that you would want to sell or merge which must be quickly decided. Having an updated business appraisal lets you to make the most of every available opportunity.
Reason number 4. You might want to take on new partner and have to know the worth of the business to figure out the buy-in price.
Reason number 5. With the load of fundraising options that a small business can take, it is so important to be aware of the value of your company before you start fundraising.
Reason number 6. If you need money from the bank, one thing that can help them make a fast decision to do so is by presenting your business appraisal which if accepted can be used to build or expand new facilities.
Reason number 7. In knowing the annual per share value of Employee Stock Ownership Plan or simply as ESOP, business appraisal plays a vital role as well. When you want to share ownership of corporation with employees, ESOP is used in it as well.
Reason number 8. For gift tax planning purposes such as donation to a charity, interest to family members, transfer to intentionally defective grantor’s trust and the likes, it is crucial to have an accurate business appraisal.
Reason number 9. The appraisal of a business is critical as well for litigation support purposes like for instance, determining economic damage, uncovering value of a business in partnership or shareholder dispute, frauds, lost profit and so on.
Reason number 10. With such, it will be feasible as well to identify whether or not the business is growing, declining in value or stagnant.
So when planning a business, make sure to always take this into account.