Your stake in your business

Posted on 23rd July 2024 by Streets Business Support


Image to represent Your stake in your business

Ever wondered how your stake in your business is represented in your accounts?

The answer can be found at the bottom of your balance sheet. Simply put it is the value of your physical business assets less any liabilities; usually described as net assets.

But this is not the full story as there is a further intangible asset that is generally omitted from your accounts. It’s called goodwill. It is the extra value a buyer is willing to pay, over and above the net assets value of your business, for the rights to your customer lists and other non-physical assets that are generally left out of your accounts.

Ultimately, what you can sell a business for will be limited to what a buyer is willing to pay. But there is value in making a consistent estimate of what your business may be worth, especially if this exercise is undertaken annually, when your financial accounts are prepared.

In this way you will be able to see if the valuation is increasing or decreasing, and if increasing, is the increase at a sufficient rate to meet your planned future exit from your business?

Hopefully, many of you will already be monitoring your business value in this way, if not, please get in touch so we can figure out the best way to add this important indicator to your final accounts each year.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


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