How much is your business worth? This is a question every business owner has wondered — and it’s a question that’s tough to figure out without help. If you built your company from the ground up, it’s priceless to you. But the number you need is the value of your business independent of the time and skills you bring to it. In other words, what is the business worth if you are no longer there to run it?
A business valuation will give you an objective estimate of the value of your business.
Even more importantly, it will reveal the main drivers of business value, which can help you enhance your business’s worth. You may want to consider having a formal business valuation prepared if:
- You are getting close to retirement, and the sale of the business will help fund your retirement
- You are transferring ownership to key managers as a performance incentive
- You are planning or settling an estate
- One owner wants to buy out another
- Assets need to be redistributed because of a divorce
- You need to satisfy the requirements of banks and other lenders
While these are all compelling reasons to seek a business valuation, it’s easy to put it off. After all, valuing a business is much more complex than thumbing through the Blue Book to value your car. An expert considers factors such as the general state of the economy, industry conditions, financial performance, management experience, reliance on key people and debt/equity ratio.
A standard business valuation seeks to address three basic questions:
- What is the value of the business’s assets and liabilities? Assets include not only physical assets but also intellectual property.
- What is the value to an outside party of the firm’s ongoing business (for example: revenues, profits or brand)?
- What does the current market look like for similar businesses (comparable sales, what banks are lending on, etc.)?
A business valuation is an amalgam of answers to the above questions and will typically be unique to each business, sector and industry.
If you are interested in learning more about this service, please reach out to Mike Moore, who leads our valuation practice, and he’ll meet with you to discuss your needs.