There are many reasons why you need a current valuation of your business and many business owners assume that it is only necessary when selling but actually, this is not the case.
However, selling your business is a key strategic move and knowing the full value of your business as it currently stands, along with future potential is simply a must to ensure that you get the best possible price.
But why do you need to know the value of your business as it stands today if you have no intention of selling any time soon? The answer is simple, but often underplayed.
Business valuations and wealth management.
You have spent many hours, weeks, months and years creating a business in a competitive marketplace. There will be times of both contraction and expansion of your business. If you do plan on expanding, knowing its current value will be important for investors and lenders.
There are many other reasons why you should opt for professional business valuation services:
- Exit or succession planning – if you are intending leaving one sector or plunging headlong into a new market, understanding the current value of your business is essential.
- Business enhancement – the process of valuing a business identifies the key drivers within the business, providing an objective benchmark for future investors and growth.
- Pre-sale planning – the lessons here is simple: buyers will only pay a high price for an attractive business. A professional business valuation is instrumental in identifying changes that need to happen to make a business more attractive to buyers.
- Sale of business – buyers will negotiate hard on price, as you would expect, but having key facts at hand regarding your business and its value can place you in a strong position in these negotiations. You have a strong basis on which to assess offers from all potential buyers.
- Shareholder buy out – selling to a third party is not the only option. A shareholder, employee share ownership plan or management buyout may be credible options in many cases. Determining a price is part and parcel of professional business valuation services.
- When trading gets tough – there are all kinds of factors that affect trade and the wealth of your business. External disputes, such as tax and other complicated affairs, can lead to issues within the business.
- Insurances – for business owners, insuring their business is key as is insuring themselves. A current business valuation may be required – and a schedule of updated ones too – in order that these insurance products are at the value that they need to be.
- Shareholder disputes – you may assume that many things will never happen to your business, but situation can arise overnight and seemingly from nowhere. In many ways, a current business valuation is instrumental in resolving many issues including shareholder disputes.
- Separation – when relationships end, there is an effect on a business especially if it is family owned and run. The value of a business can form the basis of any financial arrangements as part of this process.
- Good practice – for those that own and run a successful business, having a clear idea of its financial worth is also good practice. Your business is an entity that is living; it will be squeezed by external economic factors but it will expand too. Understanding its value mean you will understand your place in the market.
Information is power.
As a business owner, you will know that there are all kinds of factors, including the expected performance of the economy, that come in to play but key in any business is knowledge. Having an in-depth, objective view of your business, including its value, is simply essential.