7 Critical Things to Know Before Seeking a Business Valuation

An organization will conduct a business valuation for all kinds of reasons. In fact, many experts recommend doing an assessment of company’s value on an annual basis. The reality is that knowing the value of a business with regard to its actual worth, in relation to its market competition, and understanding its asset and income values is instrumental to maintaining a healthy organization. Savvy business owners ensure that they have this information readily available to them at any given moment.

The reasons behind regularly valuing a business are pretty straightforward. Some of the most notable include:

  • Being prepared for a merge or sale opportunity
  • Protecting against unforeseen events like a death
  • Considering an exit strategy
  • Considering business expansion
  • Adding an LLC member or new partner
  • The exit of shareholders or partners
  • A divorce or other life changing event

All of the above scenarios require an accurate business valuation. In many cases, time is of the essence. So, getting in the habit of conducting an annual business valuation is advisable. But like anything business related, due diligence is of the utmost importance.

The following are some of the most critical things to know before seeking a business valuation:

  1. When a company’s assets change hands that can impact how the business is valued
  2. The time of year that the business is valued will affect the outcome, especially in industries like real estate
  3. Consider fair market value, fair value, and investment value
  4. Keep in mind value in a number of capacities: total assets less total liabilities, liquidation, going concern value, and the cost to replace all assets
  5. Discuss whether or not you need the valuation to be certified
  6. Invest adequate funds to obtain a certified valuation, but perform ample due diligence prior to selecting a firm
  7. A thorough business valuation can take 1-2 months to complete

An up-to-date business valuation is truly indispensable in today’s fast-paced, ever-changing business world. The market is unpredictable, people are unpredictable, and that means that there is no such thing as being too proactive.

At Ellrich, Neal, Smith & Stohlman, P.A., our business valuation experts are prepared and qualified to meet your every valuation need. Successful results often hinge on the most trustworthy, thorough valuation of a business or other enterprise. That is why we emphasize continuing education and professional depth among our partners and staff. We are mindful of the complexities and nuances in valuing closely-held businesses, and bring our expertise to bear in each business valuation engagement. Contact our Miami or Palm Beach Gardens offices today to learn more!