No-one likes paying insurance companies more than what is actually required but they necessary to protect your business but when was the last time you verified your business has the right amount of cover?
Insurance companies have been proved notorious for setting their customers higher premiums than they ought to pay. Every business owner knows the importance on keeping a company’s spending to a minimum. Spare revenue can be used to improve different sectors of your business or be saved in case of emergencies or short-notice needs. Unfortunately, overpaying on your premiums means you are denied the chance to make these savings. Clearly, this is a situation no owner wants to be in. Insurance firms base the rates they charge you on the value of your business. If you do not know your enterprise’s value, then there is no way you can know if you are paying the right rates. Here is how you can assess your business today and ensure you do not get overcharged for insurance services.
First, you need to prepare all the financial information on your business. It is easier to find all your documents if you keep them organized and up to date. The material you require includes information on your physical assets and financial statements. In case you have goodwill or intellectual property, you need documents addressing these resources as well. If you have a problem finding all your papers, engaging a business licenced valuer will help. A valuation firm will go through your accounts and legal information and make the necessary calls in case some of your documents are damaged or lost. Afterwards, they will accurately value your business for you. They will also provide information on how to value your business for future use. This will enable you to have an updated record of your documents as well as its current market value and valuation for insurance.
Preparing such a strategy gives clear-cut ways procedure should be followed. As such, it is less likely either of you in any of your small businesses in Western Australia will get emotional over the whole issue and escalate the rift that could be forming between you. Operating with a partnership agreement is also easier as it can be used to seek the advice of an acquisitions attorney in what additional steps to take apart from getting your partner out of the running and ownership of the business.
Once you have all the documents in place, you can choose a valuation method. One method involves looking at the current market value of a similar business in your industry. Conducting research on how these firms value their businesses will provide insight on how you can value yours. However, you should realize your business’s market value never coincides with the value insurance companies use to calculate their rates. In case you own a building, damage costs to the structure will not affect the value of the land. As such, the land’s value should not be included in calculating your rates. In case it is, then the company is overcharging you.
You should also take business depreciation into account when valuing your enterprise. The profitability of most firms fluctuates depending on your country’s economy and the cost of living at a time. In case your business has been undergoing losses for some years, then you need to re-evaluate its current value. An insurance company could be charging you rates based on the value of your business seven years ago, yet you could have scaled your operations down over that period. As such, you would be paying higher rates than your business requires. Knowing how to value your business under such circumstances allows you to confront your insurance provider and have them adjust your rates.
Once the buyout has finally occurred for your business in Western Australia, fill in all the paperwork required and file it with federal, state and local authorities within the area. This will help track the company down and ensure that your partner’s name is removed from all sources of funding as well as from the assets. As such, the business will be fully yours, or you will own a major stake in your business.
In case you find out you may be paying higher premiums than expected, you can engage a valuation firm to provide an official statement on how much your business is worth. A professional document will hold a stronger case against your coverage provider and have them adjust your rates.
Mathieu Paul
Director – Business Improvement
P: +618 6315 2755
E: enquiries@insightcp.com.au
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
Liability Limited by a scheme approved under Professional Standards Legislation
Reference Links:
https://www.omainsurance.com/Articles/Pages/Determining-the-worth-of-your-business.aspx
https://www.business.gov.au/info/exit/value-your-business/
