When do you need a valuation?
Certain events require or motivate business owners to get a valuation of their business. The need for these is or becomes obvious as the event arises. For example;
- Insurance purposes
- Litigation Support
- Shareholder or Partnership Disputes
- Seeking Funding
- Mergers and Acquisitions (Buying or Selling a Business)
- Marital Dissolution
It is probably obvious to business owners that the scenarios listed above require a valuation of the business. What may not be obvious is that a valuation can also provide the business owner with information on how to increase the value of their business. For example,
Exit Strategy Planning leads to Value Creation
Knowing the value of your business today will help you understand what supports and drives value growth so that you could put an exit strategy and plan in place that leads to value creation.
The net worth of many business owners is tied up in the value of the business (their retirement nest egg). Business owners need to know the value well before exiting the business so they can take action to maximize the price they will get at the exit and secure their nest egg. Preparing for the exit early on will assure that their hard work is realized.
It is critical that business owners understand what aspects of the business create value and what takes value away. Conducting a comprehensive business valuation will help the business owner develop a strategy and plan that leads to higher revenue and profit, in addition to higher business value. Therefore, when the owner does decide to sell his/her business, s/he will get a higher price for it.
Most Businesses do not Exit Successfully.
Yet most business owners do not have an exit strategy. This is most likely the reason that only 17% of business owners successfully transition their business. That’s correct, 83% do not transition successfully. This statistic highlights the importance of preparing for the exit early on.
Advanced planning is critical to success for any business owner. A key principle of value creation is that the more time you have, the more value you can create.
Make sure you realize your hard work. Take charge and prepare for your business exit or succession early on to maximize the value of your business and secure your nest egg.