Business owners today are normally consumed with worries like budgets, bettering their product and/or service, and retaining a happy, productive staff. These worries often lay the foundation for how the company is able to run efficiently, no matter where a company is in its lifecycle. While the scale of these worries certainly varies in a startup company compared to a seasoned business, they are omnipresent at all levels. Surprisingly, those worries are seldom related to the actual value of the business. Most entrepreneurs assume that a business valuation is only necessary when they are getting ready to sell the company. But is that assumption a mistake? The short answer is yes.
Most notably, many business experts point to the fact that the exercise of having your business valued actually makes it more valuable. Looking at things like operations, financials, revenue models, and market opportunity is fundamental to business planning, but it also lays the foundation to getting a business valuation that can be used as a business tool.
In fact, business owners should have their business valued annually to protect themselves against a number of unforeseen possibilities. Let’s dive deeper.
Complete a Valuation to Better Serve Your Business Planning
Business planning for a startup all the way to a developed organization means taking a bird’s-eye view at where the business is currently, where its intends to go, and what outside factors could help or hinder this plan. In many cases, entrepreneurs use the end of the year as a great time to stop to think about the direction of the company. However, what many entrepreneurs neglect to do at this time is it to complete a valuation.
Some of the most crucial reasons that a business owner should conduct a business valuation regularly are as follows:
- No matter how old you or your company may be, the reality is that you will leave at one point or another. Valuing what you have built will facilitate the process of preparation to eventually get full value.
- Knowing true company assets means conducting a valuation based on true numbers, not estimations. In doing so, you will be armed with the knowledge that it takes to understand how much money to reinvest in the business, what sale price would garner a profit, or even the accurate amount of insurance coverage.
- Exit planning simply cannot be achieved without completing a business valuation. In most cases, business owners come to find that their current shareholder value is not enough to meet their personal retirement needs. This activity will help to highlight these issues.
- The opportunity to update your Buy and Sell Agreement means valuing the business so that you and your partners understand exactly where your interest lies.
- Obtaining a current, accurate understanding of the company’s value is instrumental to effectively running the business. Hire an outside company to determine the value of your business and watch as it guides countless decisions thereafter.
Understanding the true value of your company today lays the groundwork for increasing its value tomorrow. Successful results often hinge on the most trustworthy, thorough valuation of a business or other enterprise. As such, at Ellrich, Neal, Smith & Stohlman, P.A., 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.
The valuation of a closely-held business requires more than the application of a simple rule-of-thumb formula. All aspects of the subject company need to be considered as well as consideration of economic, industry and other outside factors that may increase or decrease the value of the entity.
Our trained valuation analysts have the qualifications and experience to value a business for a variety of purposes, including the purchase or sale of a business, divorce of an owner, estate and gift matters, business and contractual disputes, eminent domain condemnations, and to assist in financing. Contact our Palm Beach Gardens or Miami business valuation experts today to learn more!