Is This Your Situation: Figuring Out Why You Need a Business Valuation
Business valuations are often essential when you’re trying to sell, but there are other reasons for getting one. A business valuation can help do the following:
- Strengthen your credibility. An independent, outside valuation builds confidence — yours and your employees’ too. Even better, it projects that confidence to lenders and future buyers.
- Keep employees motivated. Cash and stock-based incentive programs tend to be tied to your business’s growth. A business valuation will set forth the company’s current value to your employees, show how you measure growth and indicate how their rewards will be determined. And that will motivate performance.
- Track your goals. Suppose you decide to launch a new product, add staff or expand internationally. You’ll need to measure your progress to see how your efforts impact the value of your business. A valuation gives you a place to start.
- Determine when you can retire. Small-business owners often have an inflated sense of the value of their companies. If you are counting on income from the sale of your business to support you in retirement, it you need an estimate now.
- Expedite sales and acquisitions. If you have a good idea of what your business is worth, you are more inclined to price it attractively for interested buyers. If you wish to merge with or acquire another company, having an up-to-date business valuation can allow you to move fast on your ideas.
- Inform your estate planning. How will you ever be able to work on an estate plan if you don’t have an accurate valuation? Most of the time, the value of your business represents a sizable percentage of your net worth. The valuation helps you to pass your business on to children who wish to continue to be involved in its everyday workings.
- Protect your family. A business valuation could help your family deal with the potential sale or dissolution of the business if something happened to you. Knowing the value of your business also may be key in divorce proceedings, or if you want to buy out a partner and bring in one of your children.
- Determine a buy-in price. You may decide to take on a new partner or an LLC member. You need to know the value of your business to come up with the buy-in price. Or, you may need to separate from partners or shareholders, and you need to know the value to figure out how to divide up the business.
Give us a call and we’ll discuss with you which of the above situations apply to you and how to go about getting a valuation.