10 Reasons Why Business Valuations Matter
Posted August 27, 2021
10 Reasons Why Business Valuations Matter
Since you were a young entrepreneur, you have poured blood, sweat, and tears into your business. You’ve overcome obstacles, achieved beyond your wildest dreams, and created a legacy. This business that was once a dream has now provided a lifestyle for you and your family.
For years you’ve nurtured this business; you persevered through the long nights and relished in the successes it has brought, but have you taken a step back recently to find out how much this priceless business is worth?
Most business owners have 80-90% of their net worth tied to their business, but 98% don’t know how much their business is worth.
Take a look at the ten primary reasons why business owners should have a business valuation.
Better understand your business and its potential
You’ve spent years building this business from the ground up, and no one knows it better than you. It’s critical for the long-term success of your business to have an accurate understanding of its worth and potential.
Know the value of your largest asset so you can plan for retirement
As you are beginning to prepare an exit plan and think about retirement, you’ll want to know the worth of your largest asset. No business valuation will affect your estate planning, tax planning, retirement planning, and every aspect of your wealth-building moving forward.
Ensure the business, and your family are adequately protected
Many “what ifs” aren’t pleasant to think about, but something happening to you is a real risk. Would your family be protected appropriately? Knowing the value of your business can help to make sure they are.
Create a succession plan
Whether you are planning to sell your business or slowly fade out, it’s critical to have a sound exit plan and strategy in place. Knowing your business’s value will help you create a succession plan that benefits you, the company, and your successor.
Pay the right amount when you buy a business
They say knowledge is power, and we have to agree. The more you know about your business, the better informed you will be about buying and selling.
Get what it is worth at sale
If your goal is to sell the business, you must know what your business is worth before accepting any offers. Understanding your business’s worth will help to ensure you see the fruits of your labor at the point of sale.
Create buy/sell agreements with business partners
Maybe you aren’t in this alone. Perhaps you’ve acquired partners along the way and want to ensure that everyone receives what they deserve through buy/sell agreements. Having a proper business valuation will give you a strong starting point when broaching these conversations and agreements.
Explore sales opportunities
You wouldn’t wait 30 days before retirement to start planning for retirement, so why would you wait to find out what your business is worth. Knowing the value of your business ahead of time will give you a firm understanding of the potential sales price you can get from strategic buyers, financial buyers, or other methods.
Establish a trust or create an estate plan
As you begin to prepare for retirement, you may want to consider a trust or estate plan. Before you start those processes, it’s essential to know the value of your greatest asset— your business.
Prepare for taxable events such as gifting or grants
The more you know, the more prepared you will be. Knowing the value of your business will allow you to plan for taxable events such as gifting or grants so that you can maximize your funds and not be caught off guard.
Your business— it’s more than the brick and mortar walls, it’s more than the products you sell, it’s more than someone’s favorite place in town. In many ways, your business is your legacy; it’s what you’ve worked your entire life for and couldn’t imagine life without it.
At Thayer Financial, we want to help you find out the value of your business and create a plan that helps you as you begin to think about retirement and will carry on your legacy for generations to come. You can start by using our business valuation tool to give you an inside look at what your business is worth.
Thayer Financial is ready to advise you on your business valuation plans from the perspective of comprehensive financial planning. Thayer Financial is your dedicated resource for fee-only, fiduciary advice as financial advisors in Hickory, North Carolina. Schedule an appointment or call us today.
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