One company recently approached me to do a business valuation. They have been around for approximately 20 years, have never had a valuation completed for their business. They gave me 2 reasons for the assignment: (1) the owners are nearing retirement age and (2) a business broker told them someone may be interested in buying their business.
Business owners should not let too many years pass before getting a business valuation. Such a valuation can serve several purposes but the 2 below rank at the top:
- Use as a planning tool for the business - The analysis inherent in a business valuation could reveal the strengths and weaknesses of the business, not only financial but also operationally.
- Use as a planning tool for the financial welfare of the owner(s) - The value placed on the business can help determine if it will provide sufficient retirement resources.For many small business owners, their business is often their sole financial support and their major source of retirement funds. The earlier the business owner understands how their business is valued and what the current value is for their business, the more prepared they will be for the future.
Fortunately, today, it is not necessary for business owners to pay thousands of dollars for a Business Valuation. If the valuation will only be used for the purposes of determining the probable selling price for the business in today’s market- not for other purposes such as tax audits, divorce proceedings, partnership fights- then a Business Broker’s Opinion of Value should suffice; thus, the service can be quite affordable.