The Importance of Knowing Your Business’s Value

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Posted by Jennifer Smith on

How much is your business worth? How much is it actually worth to a buyer if you were to sell it right now? Even if you’re not ready to sell at this moment, knowing this number is very important for a few reasons:

  1. Planning: We know that most business owners work with financial planners and accountants to plan for their future. Or they should. We also know that for most owners, their business is one of their largest assets and a huge portion of their overall retirement plan. When these advisors are looking at your net worth and calculating your magic retirement number, it is vital that they have a real number to plug in for your business’s value. Being off could wreck your retirement, especially when you consider the future value of a dollar.
  1. Growth: Sometimes when we discuss the value of an owner’s business, the number is lower than what they were hoping it would be. When you get a valuation done early, we’re able to help you make a plan to increase the value over the next several years. It also establishes a baseline so we can do periodic valuation “check-ins” to make sure that what you’re doing to grow the business is also positively impacting the value. If you’ve been reading our content for a while, you know it’s not all about the revenue.
  1. Crisis: A health scare or sudden death puts a lot of people into crisis mode and your family or partners may need to sell the business quickly. If you have a recent valuation (within a year), this will lessen the stress on your spouse and/or partners when they have to make major decisions about the business, and they are not in the best frame of mind anyway. With just one call to us, we can help them make those big decisions based on the numbers and value we already have on file.

Getting a valuation is a minimal investment that has great benefit to you and those you care about. When you decide that you need to know what your business is worth, contact us.