A Business Valuation Is Key To Bring in The Multi-Million Dollar Funding You Need

Millions of businesses seek funding annually to scale operations, refine their products, and enter new markets. In contrast to public opinion, established companies require financing as much as a startup might. However, both players need help to secure capital that conveys a more comprehensive value to their organization. Business valuation has always been a critical component in M&A deals because of its ability to assess worth holistically. Mark Zyla, the managing director of Zyla Valuation Advisors, suggests that all businesses seeking capital should leverage valuation services to understand their assets. By frequently measuring and analyzing company value, stakeholders can ensure all assets, both tangible and intangible, are considered during acquisitions or funding rounds.

The financing landscape has been particularly challenging in recent years. Increasing prices, high interest rates, and strict lending practices are becoming obstacles for any business to find the right financing. However, small businesses face a disproportionate number of roadblocks preventing them from meeting organizational goals. Only 42% of small businesses receive the funding they need. While larger businesses have more connections and resources at their disposal, they remain at a disadvantage if they don’t understand their companies’ true worth.

As business has changed dramatically in the last century, valuation has become an even more important investment. Since tangible products and services have gradually dematerialized, the intangible assets have headed in a vastly different direction.

Many small business owners reference studies from the mid-1970s when tangible assets represented the majority of the value of the globe’s top-performing companies. In the modern age, where technology and top-tier talent drive business growth, value is more commonly held in intangible assets. However, industry regulators are slow to accept this truth. As a result, many businesses are leaving millions on the table during critical deals. Zyla hopes to empower companies to recognize this shortcoming and explore valuation services that suit their needs. 

“Today, studies show that the majority of company value is in intangible assets,” Zyla says. “However, current accounting standards are doing a poor job of covering the key areas where intangible assets can be found. For companies to ensure they receive fair deals, deal makers must make a concerted effort to improve how intangible assets are measured. On the other hand, businesses should also have their worth frequently evaluated by highly skilled professionals that understand the nuances of this practice.”

Intangible assets are assets of an enterprise that have no physical substance but contribute to the business’s cash flow generation. Brands, trade names, human capital, proprietary technology, and trade secrets are just a few examples of intangible assets. While they are overlooked by many valuation professionals, they are integral parts of a business in the 21st century. In the last 25 years, investments in intangible assets have increased 29% with the rise of tech-driven businesses. The COVID-19 pandemic had a large influence on this transition, but the world’s shift to an information economy has also played a large role.

Intangible assets have a large impact on overall valuations and directly influence investment decisions, which is why Zyla advocates for more companies to reap their benefits. In addition to improving cash flow, including intangible assets in valuations can support business development and offer enhanced returns to stakeholders. With the emergence of Environmental, Social, and Governance (ESG) initiatives, new evidence has highlighted how these intangible assets can improve recruitment and retention and increase market reputation.

Valuation firms such as Zyla Valuation Advisors are here to provide businesses with the support they need to reach their goals and receive the funding they need to take them to the next level. Making these organizations understand the value of both their tangible and intangible assets may not guarantee them this support but it gives them the tools they need to demonstrate their worth.

Investing involves risk and your investment may lose value. Past performance gives no indication of future results. These statements do not constitute and cannot replace investment or financial advice.