The entrepreneur invests capital, time and effort to take a business idea to become a great company. This drive to build, grow, and maintain goes beyond just the pursuit of more profit or more wealth.
For an entrepreneur, doing business is his passion, it is a lifestyle.
This explains that many entrepreneurs, even after having achieved the economic and social success they were looking for, continue to run their businesses many years later. And not only that, but they are still looking for new opportunities to do business and also new strategies to take their companies to higher levels of growth.
The value of that effort is the earnings that have been capitalized in different ways.
Wealth is physically manifested in properties, facilities, machinery, inventories, a loyal client portfolio, a trained work team, consolidated points of sale, transportation units, investments in money, etc.
But also, wealth manifests itself in intangibles that are often much more valuable than the physical manifestations of wealth.
I am referring to the credibility gained in front of suppliers and clients, in the positioning and participation in the market achieved by the company over the years, the volume of sales that they manage to invoice each year and all this manifested in what we call the value of the brand or commercial credit.
The earnings converted into a cash flow that is compounded month by month, over the years, it becomes wealth. The value of this wealth is the value of the company.
Objectives and Benefits of Valuing a Company
The entrepreneur may be interested in knowing the value of the company for various reasons.
Several years ago one of my oldest clients asked me to rate his company with almost 40 years in business. His company, already established, was quite profitable. This entrepreneur was really investing little time in the day-to-day running of his business. His visits to the company were limited to two or three times a week, about 3 hours each time.
He had no children who wanted to join the company. He no longer had debts with banks and no one was buying the company from him.
From my point of view, as a consultant, he was quite comfortable. Every month, he withdrew his earnings, which were quite attractive. All this without major complications. It wasn't growing much; but it had a consolidated portfolio made up of several multinationals with which it had a very solid relationship.
I asked him the objectives he had for asking me to evaluate his company and his answer was simply: “Don Enrique, I just want to know how much the effort of all these years has been worth. I am not interested in selling. Just tell me how much my business is worth. It is a simple whim. "
An entrepreneur or group of entrepreneurs may also be interested in evaluating their companies when they are faced with any of the following situations:
to. Some of the partners want to withdraw from the company and are offering the shares to their fellow shareholders.
b. A new partner wants to join the company to inject fresh capital into the businesses and take them to the next level of growth.
c. Another group of entrepreneurs has shown interest in acquiring all or part of the company.
d. The partners want to make the company "public", they are thinking of offering the shares of their businesses on the stock market.
and. A new generation of the family is joining the company and it is necessary to distribute equitably the shares among the shareholders who will be incorporated into the operation of the business and what they have right over that value; but they will stay out.
F. When the partners wish to formalize a corporate trust and must also know the value of each share and make a fair distribution among the heirs.
g. When, for various reasons, the partners want to convert a large company into several companies with specialized activities and separate legal figures. Opening the possibility that the partners also separate and continue operating the company; but separately.
h. The partners are considering converting their company into a business chain under the franchise format.
The objectives are the same: to know the value of a company to meet some of these mentioned needs.
Entrepreneurs know from experience and intuition that their companies are much more valuable than the sum of their land, facilities, machinery and inventories. Also that a "going" company has a very different value than if it had its doors closed to the public, even if it was a few weeks ago.
Your comments are valuable, improve the quality of the article and allow you to leave queries that I will be happy to answer. You can leave them at the bottom of this article, in the space that I have enabled for that.
