What’s Your Business Worth? – As discussed by Mr. Naman Shah, director Biz Equity, during EPICSG 2016

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Expo for Property Investing and Crowdfunding (EPIC) is an annual event organized and hosted by CoAssets to highlight the significance and rising popularity of Crowdfunding in the highly digitized world of business and entrepreneurship. One of the eminent speakers of the event EPICSG 2016, is Mr. Naman Shah, Director of Biz Equity.

Biz Equity is one of the world’s largest providers of Business Valuation service. They have created the first patented online business valuation service. Their mission is to democratize business valuation for the 98% of the world who have avoided this important question until now – “What’s Your Business Worth?”

Mr. Naman Shah, during his speech brought to light some of the most significant questions concerning Business Valuation like, “why is it important? How can it be used? And when can you use it?”

Claiming that business valuation is a mix of both art and science, Mr. Shah started with discussing the three most common approaches of Business Valuation, which are either used individually or sometimes in a combination, and their respective shortcomings.

Three Common Approaches of Business Valuation

1. Discounted Cash Flow/Future Cash Flow – Business is valued based on projected cash flow, using capitalization/discount rates.

Shortcoming – The assumptions used for calculating the expected cash flow can make or break the valuation.

2.  Market Perspective – Factors used for business valuation are based on industry-wise trade margin, receivables turnover, inventory management.

Shortcoming – It is assumed that all the companies from a certain industry are similar in worth.

3.  Asset Method – This method means that a value of a business is the sum of all its assets.

Shortcoming – Calculating the exact value of intangible assets like goodwill, customer base, etc., is a complicated procedure.

Mr. Naman continued to exclaim that most of the valuation firms use one or a combination of any of the three methods. However, what makes business valuation an expensive and cumbersome affair is to find out the most appropriate method of valuation for any entity. Service providers require to find a combination of these methods that is apt for a particular company. Which is determined by the industry the company belongs to; size, scale, and age of the business, etc.

The director stated, “90% of Small Business Owners do not know what their company is worth.” He further explained that it is evident that a small business, a new venture or a struggling SME that is trying hard to meet ends will not think of spending $8-10k on getting the business valuation done by a certified shop.

Key factors driving business valuation space in the current scenario

  • Cost Involved – $8-10k
  • Time-consuming – takes up to 4 weeks
  • Being in a black box – Induces confusion
  • Event-driven – Valuations are done for a certain reason like raising finances, liquidation, etc.

Mr. Shah insisted that doing a valuation on an ongoing basis helps a company understand its current position and better compute as in what will it take to reach a set milestone and keep on improving. He quoted, “Someone once told me, valuing your business when you want to sell it is like planning for your retirement when you retire.” However, till date people pick up on business valuation for very specific reasons.

Some of the key reasons for doing Business Valuation

  • Selling the business
  • Funding retirement – A CNBC study says that close to 2/3 of business owners globally plan to fund their retirement by selling their businesses.
  • Doing an Insurance
  • One of the partners decides to quit
  • Raising investment through inside or outside organization
  • Attached valuation report along with annual financial report will help organizations strategize their business better
  • Estate & Succession Planning
  • Performance health checks to spot the strength and weakness of the business

Mr. Shah said, “Knowing your business valuation is not just proper financial planning for yourself and your family; it also helps you understand your business potential.” Business Valuation helps in garnering many more benefits.

Quick 4 points as on how a Business Valuation helps:

  • It helps you understand your true worth
  • Find out your business potential
  • Properly plan your financials
  • Know how to plan future savings for your family

He wrapped up his talk declaring that scope and use of business valuation go much beyond the business world. It works as a support system for an ecosystem of advisors. It is evenly required by insurance and wealth management companies, banks, as well as, government agencies.

Moreover, it is one of the key numbers that is most sought after in the alternative lending world. It helps the alternative lender do a better credit risk assessment before extending a loan to any business. Thus, as we are at the onset of a rising and shining alternative lending industry; Business Valuation is going to become one of the key metrics in the coming decade.

 

To know more about the EPICSG2016, you can visit www.coassets.com/epic  or call 6532 7008 to get more information about up and coming events.

CoAssets has been at the forefront of promoting crowdfunding and advocating educational events to empower and inspire people and this is the main thrust of EPICSG2016. With this year’s theme of “Achieving Greater Possibilities CA_noshadow_blackwith Financial Opportunities,” the event aimed to bring investors, opportunity providers and start-ups together to discuss pertinent issues and subjects such as sustaining business growth, managing business life-cycle challenges and accessing about Crowdfunding in Asia, and how Crowdfunding can complement and add value to the entire finance ecosystem.

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The EPIC series started 2 years ago and has successfully concluded its third Expo in Property, Investing and Crowdfunding (EPIC) event in Singapore, drawing more than 700 enthusiastic participants, a 40% increase since the first event in July 2014. This indicated robust interest in alternative finance and FinTech, as well as strong investor’s appetite to spot and support promising start-ups.  The event also rewarded participants by giving away S$1,000 CASH to 5 lucky winners who were at the event.

 

 

This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated byCoAssets.com. CoAssets is South East Asia’s first listed and largest real estate crowdfunding platform. If you have any Crowdfunding news or stories to share, [email protected]

 

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