How to Turn Post Tax Season Into Business Valuation Season

How to Turn Post Tax Season Into Business Valuation Season

When accounting or valuation professionals position themselves as trusted advisors with the ability to offer consulting, they can leverage their knowledge of a business’s financial data to provide a useful service that extends far beyond valuing the business.

A thorough “business cleaning” much like a seasonal housecleaning can provide a business owner with a more efficient operation, a better sense of risk and a plan for the future, whether it’s oriented toward aggressive growth or a four-day workweek. 

A home is a useful metaphor for accounting and valuation professionals to consider as they try to generate repeat valuation and consulting work with business owner clients. Home sellers know that the first step to selling a home is getting it ready to be shown to potential buyers. With that said, business appraisers have an excellent vantage point to see deep into the workings of a business in the process of doing their appraisal. They can then offer their insights to owners who would like to increase the value of their business. 

And even if you're not selling your home, a thorough cleaning is much more valuable than just the lemon scent. Organizing your possessions can optimize the use of your spaces and can save time in daily tasks. When spaces are clean and items like pots and pans are easier to find, life goes more smoothly.  During a thorough cleaning, you may notice a broken door lock or leaky pipe that, if caught in time, could save money down the road.

Checking the value of a home periodically and working to maintain and improve the asset is important, even if a sale is years away or not even in the plans. In the same way, business owners might believe that valuation pertains only to a business sale or acquisition. But valuation experts can market and sell their services as more than a one-off calculation by teaching business owners that the process of arriving at the appropriate value of the business (often their most important asset) can be as important as the value itself. A thorough valuation can both optimize a business’s existing strategy and prepare it for impending or eventual sale.

Business Optimization: Highlight the remodeled kitchen

Making the most of a home’s selling points can make the difference between attracting a buyer and languishing on the market. Similarly, a valuation expert can advise on the financials and operations of a business to help the owner improve the overall value. Asking the right questions and requesting the right documents will allow the valuation professional to understand every facet of the business.  

For example, does the business use too many suppliers and lose economies of scale? Are existing contracts outdated and overpriced?  Are profit margins factoring in costs like salaries or the owner’s time? Are there low-cost technology solutions that would increase efficiency, reduce costs, or improve customer experience?

The valuation expert can focus on low-risk recommendations that increase the business’s efficiency and improve overall operations.  Read more on CPA Practice Advisor.