Valuation ReasonsBusiness Information For Sellers Sell Sell a Business Selling Selling a business Valuation Valuing
Posted by Jennifer Hendrickson on
Do you know what your business is worth? I mean, really know? Most business owners think they have a good idea what their business is worth, but often it is only an unrealistic expectation. Sometimes they shortchange themselves, other times they tend to think it’s worth more than reality. Does it really matter? The quick answer is this: Yes it matters.
As lenders become increasingly scrutinized by their boards, stockholders and regulators, that scrutiny is being passed on to borrowers. Some lenders are now requiring an independent business valuation before approving additional loans or credit lines. The Small Business Administration (SBA) may also request a certified valuation.
A valuation is the first step in the successful sale of any business. Most businesses that are “For Sale By Owner” never actually sell and one of the many reasons is an unrealistic selling price. A savvy buyer will not pay more than a business is worth, and a business that is priced too low sends up red flags. An experienced valuation expert can determine the fair market value of your business and prepare you to answer prospective buyers’ questions about that value and any risk drivers that may be present. There are many different types and price points for a valuation, and your business broker will recommend the right one for your situation.
Many owners start thinking about transferring or selling their businesses a few years before they are actually ready. These are the business owners that know the value in planning. Nobody likes bad surprises, and finding out that your business isn’t worth what you thought is certainly a bad surprise. By having a valuation done early you can start working on your exit strategy in advance and you have time to make strategic decisions to positively impact your business if you find that it isn’t worth you originally thought. It will also tell you where to focus your energy to have the most positive impact on value.
Sometimes, exits aren’t planned. A sudden death or disability can leave a business leaderless, without a succession plan, and susceptible to a much higher risk of failure. Don’t leave your spouse or other heirs in the position of having to make crucial decisions about your business without actually knowing the true value of your financial interest.
There are many other good reasons for a professional valuation. Buy/sell agreements, estate and gift tax planning, C to S corp conversions, divorce settlements, foreclosures, insurance valuation and litigation support are all excellent reasons to know exactly what your business is worth. Each situation may also require a different type of valuation.
If any of these situations apply to you, Murphy Business can help. Call us today to get started on your professional valuation. Your lifetime of work and investment is worth it.