Author: RICK EVANS, CA, CPA(CA), ABV, CFF, CVA, CFE
Many business owners only obtain a valuation of their business when they are considering a sale, or reacting to an unforeseen situation. But there are benefits to always having an up-to-date valuation in hand. It’s a proactive measure that ensures you are acting from a position of strength when the unexpected does happen.
Here are some reasons why you should have a current valuation of your business:
- You are ready if you receive a purchase offer for your business that has to be acted on quickly.
- Value changes over time. A business valuation helps you to understand, on a timely basis, the impact of variables such as changes in the economy, your industry, your expense structure and staffing.
- A business valuation will highlight areas of strength and weaknesses in your business relative to your industry peers.
- Further to points 2 and 3, this gives you the insight you need to take appropriate corrective action.
- You understand your capacity to borrow if business opportunities present themselves.
- Your business can be quickly put up for sale if family tragedy or other misfortune demands a fast exit.
- A valuation can help separate individual goodwill and business goodwill.
- Individual goodwill is transferable, if you recognize it and take the time to substitute other people with similar skills and experience into your role.
An up-to-date business valuation prepares you for when opportunities present themselves, helps you understand how to create value in your business and reveals changes in the value of your business over time.
Most importantly, it gives you the power of choice, and protects you from becoming a victim of circumstance when the unexpected happens. An up-to-date business valuation allows you to act in your best interests, as well as those of your family, employees, customers and fellow shareholders.