Shouldn't you know what your biggest asset is worth?
Most business owners think of business valuation as a necessity when reacting to an event like retirement, death, a business dispute or divorce. But the best time to do a business valuation is long before a triggering event occurs. Business valuation should be the first step in succession planning, rather than the last.
What is a business valuation?
A business valuation is a professional review of a business to determine its real-world market value. At its most valuable level, a business valuation is a tool for building value and providing owners with greater flexibility. A good business valuation identifies a business’s key value drivers and anticipates what effect management decisions will have on value.
Reasons to have a business valuation:
- Understand the value of your business in relation to your overall financial and estate planning
- Factor the value of your business into your retirement plans
- Plan for the succession of your business to a younger generation of family owners
- Plan for the eventual sale of your business
- Establish your bargaining position in a potential business merger
- Bolster your creditworthiness
- Determine the viability of your business growth plans
- Create a buy-sell agreement with your partner/s
- Establish the value of the business as a marital asset
Questions every business owner should ask about business valuation:
- Why does business valuation matter to me if I’m not planning to sell my business?
- Why should I work with a business valuation professional 5 years before selling my business?
- What can I do in the everyday management of my company to enhance its value?
- Who should do my business valuation?
Charles Sandy Kennedy Jr., CPA/PFS/ABV