Getting a valuation on your business is a very big part of selling the company and also keeping track of how well you are doing. When asked if they have a business valuation, most small business owners will respond with “No, I’m not ready to sell it yet”. This is a common mistake. There are many other reasons you could get a valuation other than to sell the company. So let’s take a look at why all small business owners should be on top of how much their business is worth.
Getting a valuation from a professional, outside firm helps build confidence in everyone around you. Your employees, lenders, future buyers, and anyone else that would have a reason to look. If you ever plan to expand, or buy something large, your company will need to be able to prove that it can handle the payments that come along with the expansion. With a valuation, you will be able to provide proof of how well your company is doing, which will greatly increase your chances at being approved for loans.
Since you will get a complete breakdown of your financials, you will be able to get a better look at how well your company is doing and whether or not you are meeting your goals. It’s common for a business owner to assume that their goals are being met, only to realize that they really weren’t due to expenses later on. You need to be on top of your business to be able to understand it’s true potential, so don’t get lost in all of the financials. Get a valuation for the best understanding and to ensure you are where you should be.
A lot of business owners will eventually sell the business so they can be able to retire and live their lives. Well, if that is your plan, then you can use a valuation to predict what the future has for you. Not only does a valuation provide you with how much your business is currently worth, but it also will show you how much you can expect the company to be in the future, based off of past sales. Of course, this is only a prediction and no one knows the future, but it can really help gauge when you may be able to sell to eventually retire.
The last and most obvious reason to get a valuation is right before you decide to put your business on the market. This is the most common reason for a valuation, and it’s very necessary prior to any sale. You can use the results of the valuation to get a ballpark area of how much to expect, you can use it during the negotiation process, and a valuation is usually required by most interested buyers.
So although you may not be trying to sell your business right away, it is still something you want to get. A lot of successful business owners get a valuation once or twice a year to just keep on top of everything.