It’s easy for business owners to get lost in the day-to-day operations of their companies. So they often overlook a significant component of their overall financial health and wealth – the value of their business. Knowing the value of your business is incredibly important as there are several occasions where having a formal valuation of your business can come in handy.
In our article, the team at Hallmark Business will discuss the five reasons you need to get a valuation done on your business. When you learn of these reasons, you will know why taking the time to have a valuation done is one of the best business decisions you can make this year.
Even though there are more than five reasons business owners need to get a valuation, we have narrowed the list down to the most serious situations when having a valuation proves vital. Have a look below to learn more about these reasons.
For many, the sale of their company in the future is a major part of their retirement plan.
Yet, how can you plan for your retirement correctly if you don’t know the valuation of your business? The very last thing you should do is to bank on getting a large sum of money during its sale because you could be left with a pittance of what you thought you would receive.
That’s why you must get a valuation done well before your retirement and near your retirement so that you know its fair market value and if the price you will receive is in line with your retirement goals.
If you’re considering selling your business and ‘cashing out,’ you need to know how much your business is worth, and this is where a valuation comes in.
Having a valuation completed on your company will tell you how much your company is worth so that you’re well-informed during price negotiations and know what is fair and what isn’t.
Additionally, having a valuation done years prior to selling will help you achieve a significantly more favorable outcome because you will learn more about the value drivers of your business.
By planning a sale early based on your valuation estimate, you can improve these value drivers to maximize the amount you receive when you sell your company.
Do you know how much an investor should pay to invest in your company? If not, it might be time to have a valuation performed. If you have a valuation completed, you will know how much your business is worth and be able to fairly set a price for an investor to buy into your business.
Although there are other ways to set investment values using critical metrics like earnings and appraisals, a valuation is still your best bet – especially if you have investors acquiring a substantial interest in your company.
Unfortunately, when a married couple divorces and one or both parties have an ownership interest in a shared business, the value of the company interest needs to be established for property division.
Thus, if you’re currently going through a divorce and have a privately held business, it’s best to get a valuation even if both parties are amicable and can agree on the value of the ownership interest.
With a valuation performed, the actual value of the business is determined – avoiding disagreements, conflict, and other issues that might have arisen. After all, the independent valuation of the company can be utilized for preliminary divorce settlement negotiations.
Most businesses will, at some point in time, require financing from lenders. It can be incredibly challenging to obtain funding if you haven’t had a valuation performed on your business.
So if you’re seeking a loan to expand your company, add a new product line, modernize your equipment, or capitalize on a recently revealed opportunity, you need to have a valuation performed.
With a valuation, a lender is more likely to consider your request and grant it if they can see that your business is worth the investment and risk.
These are only some reasons you should consider getting a valuation on your business. At Hallmark Business Brokers, we have a team of committed professionals with specialized business valuation credentials and years of experience who are more than capable of helping you with your business valuation needs. Give us a call at 941-445-4726. or come see us at 230 Tamiami Trail, Suite 1, in Venice, and our knowledgeable team will schedule a consultation to help you learn the worth of your business.