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What’s the difference between a market appraisal and business valuation?

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Is a market appraisal the same as a business valuation?

Market appraisal and business valuation are two terms that sound similar, but they each have a distinct meaning. In the context of a business sale, both are extremely valuable to obtain but they would be sought at different stages.

So if you are wondering whether the market value of your business might be in the same region as your own estimation of its value, a market appraisal would be the ideal way to find out.

If you have moved beyond that early stage, however, and have already decided that you want to place your business on the market, you would need to obtain a professional business valuation before moving forward.

What is a market appraisal?

A market appraisal concerning the sale of a business is a general guide as to what your business could be worth. It is conducted at an early stage, and although it is not as in-depth as a business valuation, a market appraisal is sufficiently accurate for its purpose.

In some cases, the results of a market appraisal can solidify the decision to go ahead and place a business on the market. In others, it is very useful in helping business owners to decide what they want to do with regard to their business.

They may decide to wait a while before selling, for example, and improve aspects of the business as necessary with a view to ultimately achieving the price they have in mind.

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What is a business valuation?

A business valuation is more comprehensive than a market appraisal. It is based on a close examination of the business itself, its assets, trading history, contracts, and current place within the market.

A key element of a business valuation is that it can be relied upon to secure a mortgage or other form of lending, as opposed to a market appraisal that cannot be used for this purpose.

To provide a business valuation the valuer would need to attend the business in person. Selling My Business has extensive experience in delivering professional valuations for businesses in all industries, and can provide a professional valuation of your business.

What are the main differences between a market appraisal and a business valuation?

The stage at which it is obtained

A market appraisal is obtained at an early stage when a business owner needs to have an idea of whether it is worthwhile to find out more about selling their business. A business valuation takes place at a later stage, typically when the business owner is serious about commencing the selling process.

The detail that is used

Market appraisals are less in-depth than valuations, and provide a general guide as to the business’s current market value. Business valuations involve an extensive examination of all aspects of the business so that a detailed valuation can be provided.

Whether it can be used to secure funding

A market appraisal cannot be used by the business to obtain a mortgage or other forms of financing, but the comprehensive nature of a business valuation allows it to be used in this way.

How to obtain a business valuation or market appraisal

It is crucial to ensure that you seek assistance from a reputable source when considering a market appraisal or valuation for your business. Selling My Business are business transfer agents with more than six decades of experience in securing business sales and expertly valuing businesses.

We provide accurate and trustworthy advice on every aspect of selling a business, so please get in touch with one of the team to find out more.

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