Most people know what a business valuation is (the process of figuring out what your company is worth), but not everyone knows the different reasons valuations are performed. Aside from the obvious need for a valuation when you’re ready to sell the business, valuations are preformed for many different reasons. Having an independent, unbiased valuation is key in making strategic and effective decisions for your business, no matter the reason for the value.
Here are some common reasons clients engage us to value their business:
Buying or Selling a Business: When you know you want to sell your business, getting a business valuation is the first clear step in selling your company. The same is true if you want to buy a business. Knowing the value of the business you want to buy or sell positions you to make the right decisions.
Divorce or other Litigation: Business valuations are commonly used in divorce cases to determine the splitting of assets. They can also be used in other types of litigation, such as partnership disputes. The valuation is usually one of the last items to be settled in a dispute. A quick turnaround on a valuation completed by someone who can also serve as an expert witness, if needed, is key.
Tax Planning: As we start a new year, it’s a perfect time to value your business so that you can make strategic decisions using year-end numbers. A valuation also helps forward thinking business owners and their accountants plan for the expected tax impact when it finally comes time to sell the business. A detailed tax structuring report to tell you exactly what your tax impact will be given multiple selling structures is also a good idea.
Exit Planning: Whether you’re thinking of selling soon or several years from now, you should have a realistic view of what your business is worth and what your after-tax proceeds will be. This will give your financial planner an accurate number so they can ensure you won’t outlive your money.
Financing: If you don’t plan on selling but are ready to grow your company with the help of financing or investors, a valuation will help you show them you are a good investment.
As you can see, business valuations are used in a number of circumstances and working with someone who is certified in performing professional valuations, understands the different methods needed to accurately value a business, and has years of experience doing them is crucial. With our experience of helping people buy and sell companies for over a decade, we can confidentially assess your business and provide you with a realistic value that will help you reach your objectives.
