Company values: how do they affect the valuation of a business?

When defining the value of a company, it is not enough to examine the financial statement. Although this is an essential point in the process, the general concept of the business, its relevance within a specific industry, company values, market projections, among other things, must also be reviewed. 

In that sense, a question to be asked by any entrepreneur who wants to increase the competitiveness of his business in the sector to which he belongs is: what steps should be followed and what kind of things should be avoided to guarantee the increase of a company and the efficacy of company values?

However, there is no single method or technique for carrying out a valuation. When a Chartered Business Valuator (or "CBV" for short) is going to decide how to assess the value of a company in order to generate a report, there are different aspects that he checks and he may have as a priority one or several of them. 

The final decision on the format of the report and the focus of the study depends on the objectives of the entrepreneur when requesting it. 

It is essential to define this if you are planning a sale or transfer of the company in the short, medium or long term. Being aware of the factors that influence the value of a business is one way to ensure greater gains for all parties. 

But you can also hire a business assessment service if you are interested in obtaining a balance of the performance of your business in all areas and keep a clear track of business growth. This includes the effectiveness of company values and its impact on financial and statistical results.

Some guiding questions you can use to convey accurate information to your appraiser are: Is this a document you need to present to an outside investor? Do you want to calculate risks and projections to socialize with your team? Are you looking for a simpler report that gives you an overview of the current state of a company's value?

If you want to go deeper into this topic and be sure that you will get the right report, you may be interested in the following article of our blog: Which independent valuation report to choose? 

The importance of company values

While most of the work should be left in the hands of an expert consultant to avoid inconveniences, there are some issues that you should work on from your position as an entrepreneur.

Aspects such as accounting, marketing, studies of the sector and of taxes and fiscal regulations, the presentation of statistics, among other things, must be complemented with a clear concept of company values, the mission and the vision. 

Any investor, client or potential buyer will take this into account when drawing conclusions about the value of a company. So it is advisable that, before starting any process, you have this type of points well demarcated.

If you wonder what the importance of company values is, the answer is simple: they will define the interpersonal relationships between members of the company and also the relationships of your employees with customers. 

Undoubtedly, a good working environment and a good institutional reputation will be a point in favor when it comes to realizing the value of a company. Why? Because this will be reflected in customer retention and teamwork results and . 

An example of a corporate value could be excellence, inclusion and diversity, prioritization of environmental sustainability, among others. In reality, the list is very broad and will depend on the specificities of your business and compliance with company values.

What other details affect the value of a company?

Every little detail counts. Therefore, it is also very important that, in addition to having financial and market issues in order, the company stands out for its internal organization, for the confidence it transmits and for its eagerness to open up to new possibilities. 

Keep in mind that all of these points we have talked about are as applicable to large companies as they are to emerging businesses. The earlier you start being disciplined and structured with the review of every detail and the more you convey that importance to your team, the more effective all business processes will be. 

These are two other factors that can influence the external perception of your business:

Constant development

There is nothing wrong with a business maintaining the same business model and the same catalog of services and products for a long time. 

However, openness and the search for new horizons is important and will be well appreciated by anyone interested in the company. The market is constantly transforming and moving. Therefore, it would be best to regularly review the business conditions in all aspects.

The immediacy of information

If an investor or client requests information about the value of a company, it is ideal to have a document or presentation ready with precise and concrete data. Keeping inventory management up to date is a fundamental point in this regard.

Having a Pitch Deck or Pitchbook at hand is always a good idea. It includes everything from financial data to company values. If you want to receive advice in this regard, you can rely on the professionals at Zen Valuations. Click here for more information.