Five Important Benefits of Doing a Business Valuation
Most owners do not obtain a valuation for their business unless there is an immediate need to do so. But even if you are not looking to sell your business in the near future, it is still a good idea to obtain a business valuation if you have not done so during the past couple of years. Having a valuation can provide important facts and figures about your company, and this information can be useful in a number of ways.
Here are five benefits that owners receive from getting a business valuation:
Know the True Value of your Business: You might have a general idea of what your business is worth based on the value of some of your assets and what you have seen businesses like yours selling for. But every business is different, and there are a lot of unique factors that go into a business valuation. By knowing what your business is actually worth, you will have a better idea of your strengths and weaknesses, your performance in the marketplace, what you do well, and what areas you need to improve.
Gain Access to Investors: If your business reaches the point where you need an injection of capital to fund company growth or get through a difficult time, you might want to seek an outside investor to obtain this funding. Business investors are very careful with where they direct their capital, and they are a lot more likely to consider your company if they are able to see a detailed business valuation.
Leverage for Merger and Acquisition Negotiations: There may come a day when you are approached by a larger company in your industry about joining forces or being bought out. But as with any negotiation, the other side will want to acquire your business or merge with it for as little money as possible. When you have a business valuation that was performed by a reputable appraiser, you will have the leverage you need to hold out for a price that reflects the true value of your company.
Preparation for Worst-Case Scenarios: Life can take some unexpected twists and turns. You never know what might happen tomorrow: an unexpected death, a contentious divorce, an irreconcilable conflict between business partners, etc. When situations like these come up, it is much better to have a business valuation already completed and available rather than having to scramble to get one put together at the last minute.
Get an Early Start On your Exit Plan: Maybe you are not ready to retire right now, but you are looking to do so sometime within the next few years. Most experts recommend starting to plan your exit strategy at least a year or two prior to selling the business, and one of the first steps in this process is to obtain a business valuation. By getting a valuation early on, you will have a good idea of what you can expect to get for the business when it comes time to sell. And as we talked about earlier, you will also be better able to identify areas of the business that can be improved, so it will become more attractive to prospective buyers when the time comes.
Consult a Local Business Broker: If you are thinking about getting a business valuation, a good place to start is to speak with a local business broker. Business brokers work closely with valuation specialists to help owners with this process. They can also consult with you about preparing your exit strategy, what steps need to be taken, and how to best position your business or a successful sale in the future.