Why do I need a business valuation if I’m not ready to sell? is a question we hear all too often. A thorough business valuation offers the firm owner vital data that can be utilized to influence future strategic planning. According to our experience, the average privately owned business changes hands every seven to ten years. Therefore, whether you are ready to sell now or in 10 years, you must know the current value of your firm in order to plan for the future.
The majority of business owners have between 65 and 90 percent of their net worth invested in their company, making it their main asset. This asset is the result of years of hard work, sleepless nights, and long hours, with hopefully fruitful consequences. It meets your financial requirements. You are personally pleased with your accomplishments and your reputation in the community. Eventually, you will determine that the time has come to sell it.
Ask yourself these questions regardless of where you are or believe you are in the business ownership life cycle.
- Are you aware of the necessities for a comfortable retirement? Have you set aside more funds to assist with this expense? Is your business your largest asset? Is your business your retirement plan?
- What will occur if you are confronted with the reality of burnout?
- What if the market is shifting and substantial investments are necessary to compete with the opposition? Are you at a place where you can confidently decide to sell the business and allow someone else to advance it? Or, will you be required to ride it out, maybe putting your business and family in a financial bind as you make the necessary adjustments?
- Do you believe your company is worth a specific amount? Do you expect that to be the case? What if it weren’t? What if you are drastically mistaken and your actual value is significantly lower than anticipated? Will you be willing to continue?
The objective is that a business valuation can provide a starting point for answering the aforementioned concerns. A business appraisal can aid in developing a road map (business plan) for determining:
- What modifications must be made to boost sales and profitability?
- When to diversify the types of offerings
- Clients: Do one or two customers account for the majority of your revenue? What if those clients were to leave? How do you intend to acquire new customers?
- when to hire new employees or let someone go. Are you a vital part of the business, and how would a new owner replace you?
- How does your building’s exterior look? Sometimes a simple cleanup can make all the difference.
- Equipment: do you require capital improvements, and if so, would a new owner be forced to make those investments, affecting your value?
If you are uncertain about any of the aforementioned factors, a business valuation might assist you. You must presume that your competitors are aware of the value of their businesses, and you cannot afford to be in the dark.
The economy has recovered from the recession of 2007 and is thriving; more SBA-backed loans are being authorized than ever before, and more investors are joining the market than ever before.
At Sunbelt Business Brokers, we can provide you with a free business valuation and advice on how to prepare for the day you decide to sell. Determine the current value of your firm in order to properly plan for the future.