How is a Business Valued

The Qualitative Aspects of Company Appraisal

Is your clothing business on the rocks? Is your rent more expensive than what you earn per month? Have you consulted cost-cutting firms but still find them useless? If you are experiencing these, then it is about time that you conduct a company appraisal.

The company appraisal is a pre-requisite for you to sell your business. Here, you will hire a business valuer to compute the worth of your business. The business valuer will determine the overall price based on valuation tests, such as the competitive advantage test, the execution test and the break-even point test. What the business valuer focuses on is the quantitative aspects of the company appraisal. You, as the owner, have the duty to check the qualitative aspects of the company appraisal, including its sentimental value, stakeholders and reputation.

Sentimental Value

This refers to how important your business is to you. Is this clothing business a family legacy? Is detachment from it possible for the family? Is the decided price worth all the hard work you went through? If you answer No to all these questions, then you should not sell it after all. Redo your evaluation and identify ways to cut your expenses. Reassign your people or change your suppliers.

Stakeholders

This aspect of the company appraisal refers to the people involved in your clothing business, including employees, loyal customers and suppliers. The main issue to be addressed is: How will selling your business affect them? Will your employees be given the same treatment under the new management? Will your customers still be loyal even if the management is different? Finally, will the suppliers have the same bond with the new management?

Reputation

This part of the company appraisal refers to the image of your clothing business. Though the new management will maintain the name of your clothes business, this does not guarantee that they will maintain your vision. The new management can either improve or destroy the reputation you built.

Aside from the quantitative and qualitative aspects, there are other factors affecting the company appraisal such as the economic depression, globalization, technological innovations and consumer taste. If you decide to put your business on sale, make sure that you study these factors first.

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