You have an accurate estimate of what your house, car and other big ticket items are worth, but, if you’re like many other business owners, you may not have an idea of the value of your company. At times, a small business valuation is required for insurance, lending, compliance or other purposes, but there are additional reasons why conducting one is a wise decision. There’s a wide variety of circumstances where the process provides considerable benefits.
Selling Your Business
The sale of your company is probably the most common reason you’d conduct a business valuation. As the seller, you want to make sure you’re getting a fair price; in any event, it’s likely that an interested buyer will require it. Having documentation to support your company’s value also expedites the selling process. A business that already has a price tag on it will probably move more quickly than one that hasn’t done a valuation.
Goal Tracking
You study your financial statements carefully and budget wisely, but you probably also have goals you’d like your company to reach. Perhaps you’d like to expand into a new market, purchase a new facility or launch a new product or service. The first step in achieving these objectives is determining whether you can afford to go in a new direction. A small business valuation is a way to measure your progress over a certain time period, whether it’s one year or several. Think of it as a starting point that gives you a concrete figure in terms of growth.
Retirement Planning
Even if you’re looking at retirement several years down the road, it’s never too early to being planning. Many small business owners overestimate the value of their organization and are shocked to find that they cannot retire when they assumed. You may be counting on some of the income to support your lifestyle once you leave the workforce or would use the proceeds from a sale to finance your retirement. Whatever your plans, it’s helpful to conduct a small business valuation.
Motivating Employees
A small business valuation can even be useful when you want to motivate your workforce with incentives programs. Your ability to offer both cash and stock perks is based upon your company’s value and growth. By providing these benefits, you’re demonstrating that your business is valuable and showing your appreciation for all your employees’ hard work. Often, you’ll find that bestowing benefits like bonuses, stock or investment matching will inspire your workers to maintain high levels of performance – and even exceed expectations.
These are compelling reasons to arrange a small business valuation, but there are many more that should motivate you to go through the process. However, because the methodology is quite complex, it’s helpful to consult with a qualified professional.
___________________
Veriti Consulting LLC provides certified business valuation services small business valuation services across the U.S. To learn more about our business services call (877) 520-1280.
Read related articles:
- When Are Business Fraud Investigation Services Needed?
- Entrepreneur Tips: How to Find a Business Valuation Firm
- 4 Most Commonly Used Methods By Corporate Valuation Services
