2nd November 22

Business Valuations - Why are they so important?

Agri Frontier provides Business Valuation as one of its many services. Here we explain why knowing the value of your business at any one time is such an important tool.

A common question is: Why should I need a valuation if I’m not planning to sell my business?

The answer is that business valuation is not simply a price, but an ongoing process which helps to determine the fair economic value of the business as a whole. Once you have your valuation as a base line, you can begin to focus on areas for improvement in terms of investment, hiring, or maybe scaling back.

Regular valuations provide a solid measure of how the business is performing. This can be measured against the goals you are setting in your strategic business plan; helping you to plan ahead, identifying gaps and moving forward with measurable goals which can be achieved.

You will also gain a clearer insight into the effectiveness of your decision-making, together with an understanding of the more subtle, day-to-day dynamics of your business which you might not be aware of, and which may need to be taken into account.

If you should want to raise capital for a business investment, your valuation will provide lenders with essential information on the leverage within your business.

You will also have a clearer idea of the worth of your business to a prospective buyer, should you decide to sell. Historical valuations may act as a form of “service history” and can provide a useful starting-point for the price.

A solid business plan will help secure a good valuation. Other considerations include:

  • Creating a balance sheet, keeping track of income and expenditure.
  • Reducing risk – diversification of your customer base for example, rather than relying on the same group of people.
  • Management stability: keeping key creative workers on board.
  • Maintaining a good system for information – having clear records for finance and other business matters will mean greater confidence in the business.
  • Having an understanding on how to increase profit.
  • Maintaining good relationships with key customers and suppliers.

Agri Frontier supports African agricultural and food businesses by delivering clear and concise advice based on our robust analysis. We have the experience and specialist skills to perform valuations for even the most complex agri-businesses for a variety of purposes, with advice on the following:

  • In support of balance sheet valuations for funds and companies
  • As a component of due diligence in respect of Merger and Acquisition transactions
  • In support of debt and equity capital issuance – Sales transactions

If you are a company thinking of conducting a commercial or financial valuation, please get in touch as we would be delighted to discuss it further.

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