A business valuation is simply the process of determining the economic value of an organization.(1) It’s that thing that you do just before you are about to sell your business right? Well, not exactly. There are a lot of great reasons as to why you should figure out the value of your business at least 3 to 4 years before you even think about selling it. As Kevin Strain, Audit Partner-in-Charge at Sensiba San Filippo LLP, points out, “Business owners are visionaries, [...] Having a valuation in place a few years before that goal end date is something every savvy business owner should do.”(2) When used as a proactive strategy, business valuations can provide a multitude of benefits at different junctions; A current evaluation of the business, a road map for future planning, basis in times of structure or ownership change, as well as a basis for the important exit stage.
A current evaluation of your business is massively important for a business owner. However, just due to the nature of being an owner means you are going to be busy. Like feeding a baby while reading over that new leasing agreement for some land your company recently acquired kind of busy. A business valuation now, helps you stop and take stock of where the value in your business currently is. This allows for smarter future planning. After all, how do we plan for the exit when we don’t even know how much the business is worth now?
Structure and ownership changes bring about a new set of decisions to be made. These can be akin to a shot in the dark if your have no idea what the business is even worth. Want to implement new procedures? Where are they needed the most? Already implemented the changes? How does that affect the value? All this leads to your ‘exit’. A business valuation is a must for any M&A so as to assess the fair market value of the business.
Evaluation of the business as it currently stands, future planning, structure or ownership changes and M&A are big topics and deserve their own sections. We’ll cover them in this blog series so be sure to check back every week for the next installment. This is part 1 of a 5 part blog series on Business Valuations and how they can help you before selling your business.
If you’d rather not wait and want to go over valuing your business as well as other future long-term strategies such as Intellectual Property protection, Process & Procedure refinement, and Estate Planning today, then please don’t hesitate to contact us here.
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