Why is it that most business owners don’t know when they need a business valuation? Most often, their answer is that they are not ready to sell. However, that is only one reason to get a valuation.
As a business owner, you may need a business valuation for any of the following reasons.
- You wish to track your goals. Are you planning to buy a new office building, launch a new product, add staff, or expand internationally? You need a way to measure your progress and how your efforts impact the value of your business. A valuation gives you a starting point and can help aid in the planning process.
- You are determining when you can retire. If you are counting on income from the sale of your business to support you in retirement, the sooner you determine and potentially improve the value, the better.
- You desire to expedite a sale or acquisition. With a firm idea of what your business is worth, you are more inclined to price it attractively for interested buyers. Or you may want to merge with or acquire another company. Having an up-to-date valuation can allow you to move faster to take advantage of these opportunities.
- You need to do estate planning. The value of your business may represent a sizable portion of your net worth. How do you work on an estate plan without an accurate valuation? What about your children who are involved in your business? How would this impact them?
- You are looking to protect your family. If something happens to you, your family may have to deal with a potential sale or dissolution of the business. The information may be important in divorce proceedings, or if you want to buy out a partner or add one of your children.
A valuation will examine the general economic and industry conditions affecting your business, its financial performance, and business peers. The project will consider income, market and asset-based approaches to determining value, as well as where your business sits in the marketplace.
Don’t accept the common misperception that says your company is worth a multiple of earnings. For all, except the very small businesses, that does not take in the full picture. We can help you look at all the factors, discuss the various engagement options and reports, and get you started on a valuation project that is appropriate for your business. We want you prepared for the future, no matter what happens.
If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.
