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How to evaluate a small business: entrepreneurial, civil or public activity? Evaluating a small business is, despite appearances, not a trivial task at all. Often, it is even much more difficult than evaluating a large company. The need to evaluate a small business arises very often. In particular, in case of division of property, registration of a company as a contribution, sale, change of legal form of business or, for example, determination of the value of an inheritance or a share in it. All questions can be consulted on the website https://ocenka-servis.com.ua/ with qualified experts.
Evaluation of small business in practice is a big problem. So, let's see what the problem is and how to deal with it.
What to look for
The first task we face when preparing a small business valuation is to determine what we are actually valuing, what constitutes the assets of the small business and what constitutes its debt.
Small business is also not obliged to keep a separate account of liabilities. This state leads to the absence of information about the state of most positions of assets and liabilities. Their balance sheet value for large companies is easily read from the balance sheet. Due to the lack of proper records for a small business, it is difficult to determine the state:
- inventories of materials and goods: their status is usually unknown, if the company does not keep records in this regard in the case of running a warehouse or store, the status of stocks is determined once an hour by means of a belt;
- debtors from contractors;
- state of funds;
- any obligations, including the most formalized, such as obligations on bank loans, as well as ordinary obligations on foreign accounts for services, materials or obligations to employees, tax obligations and others.
In this regard, the source of information remains the trader himself, who, if necessary, needs to be intrigued in detail.
Personal assets versus company assets?
The separation of a small business from the property of its owner or shareholders is a serious problem. In a small business, it is very difficult to avoid using one's own property for the needs of the company and vice versa. The boundaries separating them are fluid, especially in family companies or economic activities. The above situation is actually impossible to avoid, and the exact delineation of one's own property and the company's is often not possible in reality.
