As you prepare to sell your business, your due diligence should include a proper business valuation. But when’s the right time for you to hire company valuation services? In many cases, owners lose value when selling their business because they waited too late for a valuation — a situation any small business owner will want to avoid.
Let’s take a look at a common scenario. You’ve been running your business for more than a decade. In the past few years, you’ve thought about selling, but you’ve made no concrete plans. Recently, your circumstances have changed: it’s time to sell your company. Before listing your business, you hire a company valuation service to determine the fair market value of your business.
The catch? Your business is worth a lot less than you thought. Worse yet, you no longer have enough time to sufficiently increase its value before it goes on the market. Suddenly, you’re looking at a much smaller nest egg for your retirement.
If you want to avoid this kind of situation, you should get your business valuated well ahead of time. This way, you’ll have an earlier sense of your company’s value. More importantly, you’ll have the time and the guidance you need to ensure your business will net the figure you expect to make your next move.
The Benefits of Company Valuation Services
A lot of small business owners think of valuations as little more than a formality. You need a number that you can stick on the price tag for your business. Company valuation services provide that number.
This line of thinking overlooks important benefits of getting a professional valuation. More importantly, it can lose you untold value when it comes time to actually sell your business.
A business valuation offers more than a simple dollar figure for the value of your business. It also shows you where that value comes from. What’s more, it can help you identify issues that are lowering the value of your business.
Using this information, you can develop a strategy for increased value. With help from a valuation specialist, you can come up with a plan that will strengthen areas of positive value and address areas of weakness. This way, your business will be worth much more when you finally list it for sale.
The benefits of this approach may seem glaringly obvious. After all, every business owner wants to maximize the value of their business when selling. But there’s an obvious drawback to this approach: it takes time and effort. If you wait until the last minute to have your business valuated, you won’t have the time you need to increase your valuation figure.
That’s why it’s a smart idea to hire company valuation services well in advance of selling your business.
When to Hire a Valuation Specialist
If you want to maximize the market value of your business, you need to start planning your sale well in advance. Rather than contacting a valuation specialist 3 to 6 months before you intend to sell your business, your initial valuation should take place 24 to 36 months in advance.
While this might seem excessive, it’s the only way you’ll have the time you need to increase your business’s value.
Let’s say you hire company valuation services 24 months ahead of selling your business. After your valuation, you learn that your business is worth less than half of what you expected. Accounting for the 3 to 6 months it will take to sell your business, you have roughly a year-and-a-half to address this deficit. If anything, you’ll probably regret not having valuated your business earlier.
That raises another important concern. Not only is it important that you hire company valuation services early, but it’s equally important that you find the right valuation service. If you hire an unqualified, inexperienced, or unreliable professional, you could end up wasting untold hours and/or dollars based on faulty advice.
Our suggestion? Contact your local Murphy Business® office to request company valuation services. All of our valuations follow the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation (USPAP), as well as the Business Appraisal Standards of the Institute of Business Appraisers.
As business brokers, we also know what it takes to increase the market value and appeal of your business. We pride ourselves on working closely with business owners in preparation for business sales and transfers, including professional consultation and strategic planning for raising the value of your business.
One final note: While it’s best to valuate your business well in advance of a sale, that’s not always possible. Even if you’ve waited until the last minute, there are steps that you can take to maximize the value of your company and position it for sale. So make sure to hire a trusted and experienced valuation specialist!
Need company valuation services? Call Murphy Business (888) 561-3243 to connect with a local business broker and request a valuation.