If you think it’s too early to consider a business valuation, think again. There are lots of reasons to have a business valuation – and only one of them is that you are thinking about selling.
We review 8 reasons to think about getting your business valued. We suspect that just about every business owner, with the possible exception of very recent start-ups, will find a good reason to get a valuation.
REASON #1: I’m thinking about selling
Let’s start with the obvious reason. If you are planning on selling your business in the not too distant future it makes sense to understand the true market value. We recommend you get your business valued well before you plan to sell. This gives you a chance to implement strategies to boost your potential sale price.
REASON #2: I’m planning to grow
If you are planning to grow your business then undertaking a business valuation now will establish a benchmark to measure your growth against. More importantly, a business valuation will detail areas needing improvement. Being aware of weaknesses will help you to develop strategies to prepare your business for growth.
REASON #3: I’m planning to retire one day
Most small business owners rely on the sale of their business to fund their retirement. What you don’t want is to be approaching retirement, only to discover that your business isn’t worth what you thought. If you want to plan properly for your retirement it’s important to understand the value of what is undoubtedly your largest single asset.
REASON #4: I want to make sure my family is adequately protected
Having an up to date business valuation will enable you to secure an appropriate level of insurance. And if and when that proverbial bus hits you, it will help your family deal with the potential sale or dissolution of the business.
REASON #5: I may need a business loan this year
When you apply for a bank loan, the bank is going to come up with its own valuation – without necessarily consulting you. You put yourself in a much stronger position if you have already had your business valued, and tailor your loan application to that valuation.
REASON #6: I’d like to bring in a business investor
Opportunities to bring in equity or create strategic partnerships can arise quickly. If you understand the true value of your business, you will be able to take immediate advantage of these opportunities. It’s like having your resume done before you start looking for a new job.
REASON #7: I want to create an incentive plan for my staff
If you are going to provide incentives for you staff, it’s important that you are incentivizing activity that increases the value of your business. Before you can measure an increase in company value, you need first to know the current value of the business.
REASON #8: My spouse or business partner might do a runner
None of us likes to think about the possibility of divorce, or disagreements amongst business partners – but both represent significant threats to a small business. Knowing the value of your business will keep you one step ahead when relationships get messy.
By working through a business valuation process, you will not only know the real value of your business, you will better understand your business strengths and weaknesses. The more you understand your business, the better placed you are to implement strategies that will increase business value.
Give us a call if you need assistance with a business valuation. We are here to help!