Quite often, small business owner face key decisions, yet do not have enough information to make confident decisions about their business. For most, the true value of their company is unknown and they make assumptions that the business is worth more. This can be problematic if they want to retire soon and sell the company. Hiring a business valuation consulting service might be helpful.
Reasons You May Need a Business Valuation
Getting an accurate valuation for your small business is not something done arbitrarily. Usually, your company faces certain situations. In addition to possibly selling the business, you may want a way to grow it. A valuation is useful in developing a strategic plan for growth.
For growth, you may also need more capital and a valuation report is something potential investors can use to make a decision. Perhaps this growth comes with the development of a special technology.
Stakeholders may need to know the valuation for issues such as a shareholder dispute. Compliance with an employee stock option plan is another reason.
When Should You Have One Performed?
Once you know why, you may also wonder if there is a specific timeframe in which a valuation on your small business should be performed. The triggering event determines set timeframes for completion.
Even if you do not have a serious issue to answer, knowing the value of your small business is a good thing. For instance, if you are looking to retire, start thinking about a succession plan at least five years ahead of schedule. This gives you time to make smart decisions instead of hurried ones.
Ways to Grow Your Business Value
Ideally, you should get a valuation every year. If for no other reason, the information gathered will put you in a stronger position to grow the business’s value. Your small business is an investment that might represent at least half of your net worth.
For growth potential, there are three primary areas to focus on:
- Increase cash flow
- Decrease risks
- Improve prospects for growth
The process of valuation for your business includes economic, industry and specific situations. Growth potential improve with a full financial analysis and value assessment. This informs the goals you have set for the future value of your business.
In partnership with a consulting service that understands your industry ensures that you get the most out of the valuation process.