What is Your Business Worth?

For too many business owners, this is a nagging question-they just don’t know!

A business valuation is a tool to better manage your future growth, to analyze trends, to help raise capital, and to value for estate and retirement planning. And of course, when you wish to sell, your valuation will determine the correct asking price.

While there are many “rules of thumb” to value, a business is ultimately worth whatever a willing buyer is ready to pay and what you, the seller, are willing to accept. It is very much like an auction, bid/ask, until both sides agree.

A good valuation will balance financials and marketability, hard facts and soft facts, fixed assets and goodwill. It will provide a rationale for both buyer and seller to move forward.

Hard facts flow from the income and expense statement, from an appraisal of inventory and equipment and real estate. Soft facts are everything else: goodwill and trademarks, company history, competitive advantage, customer dispersion, vendor and client relationships, and perceived glamour and lifestyle qualities.

Every business for sale should have transferrable tools and systems, policies and procedures. A sort of “User’s Guide” for the purchaser. Will the seller stay on to mentor and transition the new purchaser to clients? What will the financing structure look like and what will the tax consequences be?

Ask yourself: Do you know what your business is worth? Have you had a business valuation in the past 18 months? Do you have systems in place? Do you know how to effectively market your business? Do you have an exit strategy?

It may be time to think of selling as a preferred exit strategy. So put first things first and learn how to value your company today!

Ken Stein, CFP®
Business Broker and Intermediary
www.linkedin.com/in/kennethsteincfp
www.gotoimpact.com