When an owner aims to figure out the value of his company, they have a rough idea about the valuation of the business already. This makes them identify a predetermined figure that helps them in the calculations as well. It is a popular concept that such a value should be a multiple of the annual sales or the earnings. This is not always an ideal way to figure out the accurate number as well as the merit is not maintained in such a way as well. Especially if your company goes through the process of litigation or even when the company is sold. By now you must be wondering what is a valuation report?

It is considered the valuation of your business but what makes a good business valuation possible? People often confuse this switch as having a reasonable and accurate value, however, that is not the case always. The owner must be able to have strong points in order to defend the details when it is required. The owner should have a strong and concise explanation of all the details that can support his conclusions.

What Is A Valuation Report?

What is a valuation report? It refers to the inspection of a business to identify what is the current value of it. The property surveyors help to look at the condition and location of the premises in this basic inspection. Several people confuse it with the area survey. These are two entirely different things. This helps to look at the property in an impartial manner to get to know what is the true market value with the current details.

This helps the buyer know that the amount he is paying for a business or property is just what it should be according to its value. Further in this article. we will explore the essential elements that are really important to make a good valuation report.

Get in touch with one of our experts to make your valuation reports better than anyone else. We will love to hear you out and provide the best possible solutions to your problems. Call us on 02086868876 or email us today.

Important Elements to make A Good Valuation Report

Now that you have gathered a piece of basic information about what is a valuation report, you must be wondering about the process that makes you able to achieve making a good valuation report. The following key points are considered to be essential to making a good valuation report:

• Identification of Assignment
• Description of Business
• Economic and Industry Trends
• Analysis of Finances
• Methods of Valuation
• Other Considerations

Identification of Assignment: The professional who is making a valuation report must be able to know:

• Name of the company
• The intended purpose
• The percentage of the shares
• Effective Date

Furthermore, it is very important to have an idea of what is the purpose of the valuation report, buying and selling agreements, litigation, and financing. This will help to make a good and fair report.

Description of Business: It is again a must for the valuation professional to have a clear understanding of the business details. One should especially focus on the nature of business, threats, opportunities, strengths and weaknesses of the company. If the professional has some problems in having a clear idea of the operational idea of the business, there are chances of mistakes in the report. This will further damage the process of authentic report-making.

Economic and Industry Trends: Such external factors as industry and economic trends have a major effect on the cash flow. The environment in which the business is growing and will operate in future should be taken into serious consideration.

Analysis of Finances: Performance of the company in the past years helps to develop an insight about the cash flow condition in future. The valuation process has had serious effects on the performance of the company in previous years. As valuation considers the future value of the business as well so there should be a future forecast as well.

Methods of Valuation: In this section, there should be a clear depiction of the methods of valuation that are used in the process. It is suggested to go with a combination of methods. A detailed description of the calculations is required in this process as well.

Other Considerations: There are some possibilities of discounts on some assignments. The common discounts reasons include marketability and lack of control. Blocking discounts, key person and voting are some other examples of the discounts. It is the job of the professional to identify which one is a suitable discount.

The Bottom Line

Finally, we can bring the discussion toward wrapping up as you have gathered the right amount of information about what is a valuation report. It is suggested to the valuation professional to make a comprehensive report that has a clear and concise depiction of all the essential points added in the report.

We hope these few minutes of reading will develop a better understanding and you will follow the above mentioned key factors to make a good valuation report.

Talk to our professional chartered accountants to straight up your accounting issues if you are stuck with them. Reach out to us through a phone call or arrange a consultation meeting for instant help!

Disclaimer: The information about what is a valuation report provided in this article including text and graphics is general in nature. It does not intend to disregard any of the professional advice.