As a seasoned business owner, it is common to enjoy an intuitive understanding of the importance of knowing about business valuation. Essentially this constitutes knowing what and how much it is worth based on current market conditions and its industry position, set against the amount of work you have put into fostering its growth over the years and the available resources for continuing your work. However, many owners these days miss out on the fact that the current value of their business represents a significant portion of their personal overall wealth. To stay on track both for the growth of your business, as well as your own economic security, obtaining an independent, professional business valuation is crucial. Along with these common purposes, a business valuation will also yield the following benefits:
WEALTH MANAGEMENT AND ENHANCEMENT
A business valuation allows you to identify the key value drivers of your investment, as well as provide a benchmark for measuring value enhancement to guide and successfully track the growth of your business that, in turn, also accrues towards your own financial security. Based on a business valuation report of your venture, you can learn how its growth can be better fostered, as well as how you can successfully reap the rewards of your investment.
EXIT OR SUCCESSION PLANNING
A sound business valuation for your enterprise provides a solid basis for planning and assessing your exit options, allowing you to secure enough capital for future ventures, or the next chapter of your life, such as retirement.
PRE-SALE PLANNING
Selling your business requires planning and a business valuation will help ensure that your investment is valued at the right price. A sound valuation can help your business become more liquid, and more easily monetized, allowing you to profit greatly from the sale.
SALE OF BUSINESS TO A THIRD PARTY
Following pre-sale planning, a professional business valuation puts you in a prime position to determine the most profitable asking price for your business, as well as successfully negotiate its sale towards a favorable outcome. When you know how much your business is really worth, you can sell it for the right price, and in the process, provide you with financial security for your next ventures.
INTERNAL TRANSFER OF BUSINESS
Whether the next generation of your family is set to inherit your business; or you are gearing towards a shareholder buyout, management buyout, or employee share ownership plan, a business valuation helps establish the correct price to ask for your investment in any of these events.
TAX AND ESTATE PLANNING
A business valuation provides support for the value being transferred, and acts as insurance for potential disputes with revenue authorities.
SHAREHOLDER DISPUTES
With a sound business valuation, you can avoid legal disputes over the true value of your joint enterprise, as a professional and independent report promotes full disclosure to all shareholders/partners
MATRIMONIAL SEPARATION and other family events
A business valuation supports the proper division of conjugal assets in the face of matrimonial disputes or separation. This provides the basis for an equitable distribution of family assets. Business valuation also plays an important role during times of inheritance, or when a business is gifted.
TRUSTEE OR EXECUTOR PROTECTION
A professional and independent business valuation can help protect your business against possible Estate Tax issues, as it helps ensure that it meets current legal standards, and that values reported are fair and independently obtained.S
LIFE INSURANCE COVERAGE and RISK MANAGEMENT
A business valuation is crucial in determining the right amount of life insurance coverage you will require as a business owner, in order to adequately secure your personal investments and finances in the event of an untimely personal emergency.