As a business owner, do you know the true value of your company? Do you know what the fair market value of your business is today? If you are like most owners, you may have a basic idea what your company is worth, however, chances are great that you may not have the exact value or be even in the right ballpark of the true value.
There are many factors that go into play when determining how much your company is worth, and the fair market value is composed of much more than merely levels of revenue. Other tangible and intangible elements of value include distribution rights, copyrights, the real site of the business, as well as the value of the equipment and physical building of the business.
There are many times where obtaining a business valuation is critical, providing any business owner with valuable insight. Note the four main reasons for obtaining a businesses appraisal:
· Selling Your Business - Business valuations are necessary when you are thinking about selling your business. Anyone considering selling a business should always make sure his or her business is valued by a professional financial analyst. By doing so, you'll help make sure that you don't sell your company for less than it's worth. Also, by understanding company value, you can accurately post and hold firm on a higher asking price. A business valuation gives you the insight you need to help plan for the sale as well as your future.
· Introducing a New Business Partner - If you're bringing in a new partner to the business, having your company valued by a neutral third-party is the only fair way to set a commitment price that is balanced for all parties. Since business valuations are objectively completed, personal interests of both parties as well as the company do not interfere.
· Estate Planning - Valuations are the key ingredient in your estate planning and succession planning. How can you make sure that there will be enough liquidity to pay estate taxes and to allow for a smooth transition to your successors without knowing the fair value of your company? Being able to plan for tomorrow starts with knowing where your business stands today and this can only be accomplished by having a professional business valuation completed.
· Management Tools - A valuation is used as an aid in management plans. By obtaining thorough understanding of where your business stands today, you can make informed and educated decisions to focus on the areas of the company most in need. A business valuation will often uncover strengths as well as weakness. Obtaining such vital information helps any executive team or business owner assess and fix the issue in a timely manner to protect and keep the value of the company.
If one were to hire 3 business appraisers to value one's business, one would come up with 3 potentially widely variant results. Too many variables that depend upon the appraisers personal judgement. Also, many business appraisers are just awful. However, I have to agree that one needs to know what their business is worth (even if it is just a vague idea)for all the reasons you state plus others, like divorce.
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