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When an owner comes to us to value their business, it’s not always because they are preparing to sell. Business owners often get valuations with no intention of selling. They understand that an up-to-date valuation provides crucial insights into their company’s financial health and serves as a strategic tool for identifying growth opportunities, improving profitability, and making informed decisions. Aside from those reasons, a current valuation plays a critical role in several other key areas of financial and estate planning. Here’s how your business valuation can work for you:
Financial Planning: A Roadmap for Future Goals
At some point, every business owner must plan for their financial future, whether it be for retirement, expansion, or other long-term financial goals. Financial advisors rely on accurate business valuations to provide sound guidance on investment strategies, capital allocation, and wealth preservation. Without a precise understanding of a company’s worth, advisors cannot effectively structure financial plans that align with an owner’s objectives.
A well-documented business valuation enables financial advisors to:
A professional valuation done by someone who knows how to properly value a business helps your financial planner set you up to achieve your long-term financial goals and retire successfully.
Estate Planning: Securing Your Legacy
I haven’t met a business owner yet who doesn’t want to ensure that their family is taken care of and that the transition of their business goes smoothly. However, without a proper valuation, estate planning can become complex and potentially lead to disputes among heirs. An up-to-date valuation is a fundamental component of estate planning, ensuring that assets are distributed fairly and tax-efficiently.
Estate planners use business valuations to:
For businesses passed down within families, knowing the precise value allows owners to distribute shares equitably, preventing conflicts that could disrupt operations. Additionally, a valuation helps determine buy-sell agreements, ensuring that partners or heirs have a structured plan in place should an unexpected event occur.
A current valuation does so much more than just set the selling price on a business. They empower business owners to make informed decisions across multiple facets of their operations and personal financial planning. By maintaining a current valuation, owners not only prepare themselves for potential sale opportunities but also ensure that they have the necessary data for effective risk management, estate planning, and financial negotiations so that all decisions are made with a clear understanding of the company’s true worth.
If you haven’t had a valuation done in the last three years, now is the time to act. Regularly updating your business’s valuation and sharing it with your advisors ensures that you and your heirs remain well-positioned for financial success and long-term stability.
