Business Valuation: Why You Need One!
We know how much our car is worth from the popular automotive Blue Book. We know the value of our house as it is recorded at the local assessors office. Consumer Reports provides data on pricing to help you negotiate the best deals on everything from golf clubs to appliances, so why don’t small business owners know the value of their business?
It is interesting that we insure our cars, our homes and even appraise our jewelry, but when it comes to knowing the worth of our business most business owners don’t bother to find out, stating, “I’m not ready to sell.”
However, when you know the value of your assets, including your business, it enables you to make good financial decisions. Consider the following and have more control of your life and your business:
Goals – you might look to roll out your business nationally, buy a building, launch a new business or product, expand internationally. Whatever the reason, you need to be able to measure your progress and how it will impact the value of your business. Knowing the worth of your business is a good way to start.
Retirement – the sooner you know the value of your business, the easier it will be to plan your retirement. Once you know the value of your business you can start planning for the lifestyle you want to lead in your retirement.
Creditability- a valuation builds confidence for your staff, your lenders, and for future buyers.
Motivation – incentive programs for employees, whether cash, bonuses, or stock might be helpful to the growth of the business value. Communicating the value of the business to employees, how it is measured and how incentives are rewarded will motivate performance.
Sales and Acquisition – If you know what your business is worth you will know how to price it for potential buyers. Knowing the value will also help if you are considering a merger or acquisition. It will expedite all new opportunities.
Estate Planning- the value of your business also represents a big percentage of your net worth. Without having an accurate valuation, drafting an estate plan would be impossible. This is also important if any of your children are involved and want to continue the business.
Family Protection – a business valuation helps your family deal with a sale or dissolution of the business if something were to happen to you. It also helps in divorce proceedings or if you want to buy out a partner.
The above are compelling reasons to value your business, yet many still procrastinate. Running your business is all consuming of your time, making it even more important to have a current business valuation. It is your life-blood and if it is not taken care of you will lose what you have built.
Don’t wait for crisis to strike, contact arthur@theroartgroup.com for your complimentary consult today to get answers on the importance of a business valuation and how it will positively effect your life.
