“I’ll figure it out when I’m ready to retire…”

That is the response we hear from small business owners when we ask how much their business is worth. 

The wealth of nearly two-thirds (70%) of all small business owners is tied up in their business. For many of these individuals, their businesses become their primary personal retirement savings vehicle. Those individuals, however, could be driving blind. Without knowing the value of the business, how will they know when they can stop working or the lifestyle to expect in retirement?

Having the information needed to prepare adequately for retirement is just one of the many benefits of completing a business valuation. Here are several others: 

Increase Value

What is measured improves, and valuation is no different than establishing and overseeing a sales quota. A comprehensive business valuation will provide owners with a clear explanation of the business’s value and evidence to support the result. It can tell an owner if efforts need refocusing or whether the company is headed in the right direction. The data helps guide strategic decisions and business development plans and can even help an owner determine whether the right people are in place to support long-term goals. 

Capital Infusion

Outside investors and lending institutions will evaluate the business plan, shareholders’ agreement, investment memorandum, and valuation before investing or loaning capital.

Mergers, Acquisitions, or Share-swaps

A business valuation facilitates a negotiation between entities entertaining a possible merger, acquisition, or share-swap.

Dissolution of Partnership or Partial Exit by an Owner

When a business partnership goes bad or partners agree to part ways, the parties must find a fair and equitable split of interests. Whether the weighting of shares changes, one partner buys the other out, or the partnership gets dissolved, a business valuation will facilitate the process. 

Divorce

Business interests represent marital assets and could become part of an owner, partner, or shareholder’s divorce settlement. Both spouses may approach the settlement proceedings with independent business valuation reports, so historical valuations could provide valuable insights.

Tax Strategies

A valuation report can lead to tax benefits an owner might not otherwise claim. A current valuation is also required for estate tax settlements, calculating capital gains tax liabilities, and for income or property tax disputes.

Employee Incentive Programs

A company must disclose its value to its employees to satisfy annual requirements for Employee Stock Ownership Plans.

Insurance Planning

Nearly three-quarters (70%) of small businesses do not have adequate insurance coverage. When an owner doesn’t know the value of their business, it is challenging to determine how much insurance coverage is needed. Also, if an owner is injured or wrongfully distracted from business, a historical valuation could help recover losses.

The real reason most business owners put off finding out the value of their business could have less to do with timing than an error in perception. Traditional business valuations have historically involved an extensive, expensive, and seemingly invasive process. Thanks to innovative technology, however, those barriers no longer exist! An online valuation costs a fraction of what traditional business valuation specialists charge and can be completed in minutes, not weeks. 

While business owners are often stretched for time, when it comes to discovering how much the business is worth, there’s no time like the present. 

Our firm specializes in meeting the financial needs of small business owners, and business valuations are a critical step in our process. Click here to get started on your FREE business valuation today!

Have questions about this content, or would you like to see how a business valuation may benefit your business? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!