Are small businesses undervaluing themselves?

The majority of small businesses may be undervaluing themselves, while others could be missing opportunities for investment growth, new research has claimed.


Clydesdale Bank has revealed that only a third of small businesses are currently valuing non-physical assets such as brands and patents, although they can be of significant value.


The research also suggested that firms could be missing out on ways of accessing finance to support growth, due to a lack of understanding.


Some 49% of those questioned revealed that they didn’t believe that their bank, shareholders and other lenders had an accurate understanding of intangible assets.


Knowing the true value of a business is incredible important, especially in an environment where many firms have a low number of physical assets.


Not only does knowing the true value increase the likelihood of accessing finance for a small business, it also makes it easier to manage and overcome any financial issues should they occur.


Corporate recovery processes or other insolvency procedures will value nearly all aspects of a business in order to maximise any returns.


Therefore, evaluating businesses correctly can make the process more straight forward and ensure that true value is realised.


The research also found that many businesses were unaware of some of the incentives that are available to aid research and development and other key business activities.


For instance, only 13% of Scottish small businesses has accessed the incentives available to them while only one in five firms had a dedicated research and development budget.


Opportunities exist for UK based firms to ensure that aspects of their business are not forgotten or missed from any financial calculations.


This should enhance their chances of being successful when applying for finances and for managing any monetary issues if they occur.


Taking time to accurately include all assets in a valuation, including those that are both physical and non-physical, carries many benefits that firms would be wise not to ignore.


Seeking advice relating to business issues is recommended for companies that are unsure on their position or unaware of what to include when valuing.


By Phil Smith


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