Succession Readiness Report: Business Valuation
Succession Readiness Report: Business Valuation
Understanding the worth of your business is key when it comes to making decisions, negotiating, and setting realistic expectations.
When it comes to succession planning, consider getting a valuation report sooner rather than later. Keep reading to find out why.
Do you know what your business is worth?
We know you’ve been thinking about it. In fact, 93.6 percent of respondents say they have considered the worth of their business.
However, just over one in 10 of those say they have avaluation report in place.
Understanding the value of your business is key to making informed decisions about its future. It helps in negotiations, securing financing, retirement planning, and setting realistic expectations for all parties involved in the succession process.
Plus, if an unsolicited purchase offer lands on your desk, you need to know if it’s fair.
That doesn’t mean the business valuation outlines what someone will pay for your business, but it does give you a ballpark figure on which to base your decision-making.
Why not just compare against other businesses in your industry? This may give you a rough idea but be careful about how much reliability you put on the numbers you read about — key transaction terms and conditions are rarely disclosed. That sale may have conditions like a long leadership transition period or deferred transaction payments, impacting the sale price. Or maybe they have obsolete equipment, or are struggling with employee or client retention, all of which can diminish value.
What if comparing your business to others gives you the impression it’s worth $2 million when the actual valuation comes back at $750,000? Now you run the risk of not hitting your transition goals.
Or what if you believe your business is worth $750,000 and the actual valuation comes back at $2 million? No one wants to leave money on the table.
Not only does a valuation report offer a clear and accurate picture of your business’ worth, it can strengthen your position in negotiations, providing buyers with transparent, data-driven support for the sale price.
Selling a business is a big transaction that needs to be approached with caution and strategy. If your exit is looming in the not-so-distant future, consider getting a proper business valuation sooner rather than later.
Digging into the data
“Understanding the true value of your business is essential for making informed decisions. And while many business owners have thought about it, few have a formal valuation. Our team is experienced in providing the accurate valuation you need to strengthen negotiations and ensure you know your worth.”
– Michael Sileika, National Lead, Valuation Services
Ask yourself:
- Do I know the current market value of my business?
- What factors could impact the value of my business?
- What life goals do I have that will be impacted by the value of my business?
We suggest:
- Talk to an advisor about conducting a formal business valuation
- Review and update the valuation as needed
- Use the valuation to inform your succession planning and decision-making processes