A valuation can be helpful to have whether you are selling your company or not.
Here are a few reasons to consider.
- Preparing for the worst
Most owners would rather not think about the death of a partner or fellow owner, or even a contentious divorce. However, in the case of these events, it is good to have an idea of what your business value is vs. having to scramble to get an idea of value before talking to a surviving spouse or estate. It also can ensure your family is protected should you pass away suddenly.
- Getting prepared for retirement
We recommend having a valuation done at least a few years before you plan to exit the business. You want to understand your options. If you have partners, a valuation will help them if they are planning on buying out your shares, and they may want to be thinking about how they’re going to pay you out and looking at what the purchase will look like.
It is important for management and owners to understand the value of the asset they own. Even if you can determine the current market EBITDA stream, this number will change depending on the market trend; but it will give you a basis from which to start.
- Revealing Weaknesses
Having a valuation helps the owners look at the company’s performance and assess risk. A valuation can uncover things that may become a problem ahead of time such as customer concentration, AR turnover, etc.
- Hearsay is not a reliable source of information
Everyone is always chatting about what “Bob” got for his company. Even if you are casually thinking about your exit, getting a valuation well ahead of time will assist you in planning and building out your case. You may even have a potential buyer that is after you to sell. Don’t just wing it because of what you heard about “Bob’s” sale. Your company is different; so have a professional valuation expert work with you to help you see what possibly your greatest asset is worth.
If you have any questions, feel free to contact Joan Young, President of Sunbelt Business Brokers, Greater Bay Area – [email protected]. Sunbelt also handles Mergers and Acquisitions.