8 reasons you need to know the value of your business
“I’m not planning on selling my business any time soon. So I don’t need to know what it is worth, right?”
Wrong.
If you value your business, you need to value your business. Every business owner should have an up-to-date business valuation — not just those preparing to sell.
Do you:
- own all or part of a business?
- intend to someday retire, sell or leave your business?
- think you might die one day, or become disabled?
- have key employees or business partners who you’re trying to motivate to be more efficient, productive or profitable?
- have creditors, predators, or soon-to-be ex-spouses who might someday want a piece of your business?
If you answered “Yes” to any of these questions, you should consider getting your business valued.
Here are eight reasons why you need to know what your business is worth:
1. Planning to grow – Provides the best benchmark to compare periodic growth
2. Selling your business – Gives you a regular market valuation of the business and outlines areas that can directly improve the value of the business.
3. Attracting investment – For any capital raising you’ll need a current business valuation to put to potential investors.
4. Planning for expansion – Can help get funding, highlight areas for improvement before growth so that the business grows at the right time.
5. Approaching retirement – Provides a sale value now, so you know what the gap is between current value and required value for your retirement nest egg.
6. Implementing an exit strategy – Every exit plan should align with the owners business and personal goals. The most successful exits from business take considerable planning.
7. Future proofing – Personal loss, divorce, legal disputes and even your death all require a current business valuation. Be prepared and have an appropriate plan of action for all scenarios.
8. Insurance cover - When taking out a buy/sell life insurance agreement, business partners should purchase life insurance policies on the lives of each co-owner. In the event of a co-owner’s death the other co-owners are paid a lump sum benefit, which is then paid to the deceased's surviving family members. An up-to-date business valuation is vital for this agreement. Insurance companies will ask for it, as your families/estate will be paid according to your share of the business value upon your death.
Just like a medical check-up, business valuations should be conducted regularly as business value can fluctuate depending on market conditions, competition and financial performance.
Business valuations cost between $1,000 and $5,000, depending on the complexity of the business involved.
By working through the business valuation not only will you know the real value of your business, but also have a better understanding of its strengths and weaknesses. We can identify the key growth drivers, and help you implement simple but effective strategies that focus on increasing business value.
To get a business valuation report for your business, call us on (03) 5147 1525 or email admin@adamsaccounting.com.au
2016-04-19
