1.3. What are business plans needed for?

Enterprise Value

The purchase or takeover of a company requires a thorough analysis of the company's situation. A look at the past and present of the company serves to obtain an assessment of the future potential for success in the market. However, the past says little about the future of the company. Yet determining the value of a company is a necessary and difficult process. There is no such thing as the "right" company value, because the value of a company always has a "psychological" or subjective dimension in addition to objective characteristics. The person who wants to buy something has different motives than the person who wants to sell something.

In business valuation, for example, a distinction can be made between the capitalised earnings value and the net asset value. The capitalised earnings value is based on the reported profit of the last few years and the expected profit of the next few years. In determining the capitalised earnings value, for example, the "annual profit" is determined and multiplied by a factor of three to ten as the purchase price. The net asset value focuses on the potential and assets of a company, including real estate, licences, patents, etc. The net asset value is calculated by multiplying the net asset value by a factor of three to ten.

In order to determine the value of a company, it is helpful to carry out a "due diligence", i.e. a well-founded valuation. All relevant factual, personnel, organisational, legal, economic, investment, tax, liability and profit aspects should be considered and evaluated in the inventory. The property description for a craft business looks different from that for a commercial enterprise, an agency or a medium-sized company.