Determining the economic value of a small business is a critical priority that is surprisingly easy to overlook. However, having regular or annual valuations can be worth doing, especially if you are needing to make important decisions.
- You are thinking about selling it or merging. A valuation can inform decisions if you are selling your business or considering merging with another entity. When you know how much your company is worth, you can use that number to negotiate sale prices and assess compensation levels and roles in a merged company.
- You want to do some business succession or estate planning. Your business is one of the most significant assets you have. Thus, it can play a tremendous role in your future and legacy. The business’s value can influence your decisions regarding who will take it over when you leave and how you wish to transfer ownership or gifts to beneficiaries if you pass away.
- You need to identify weak points. A valuation can uncover areas where you are losing money or missing out on financial opportunities. This process can call out areas where you could reduce operational costs and improve efficiencies.
- You are getting insurance coverage. As a business owner, you likely want to protect your business from losses related to personal injury claims. If you rent or own property that is open to the public, getting general liability insurance – among other types of insurance – will be crucial. A recent valuation can be essential in getting the right amount of coverage and avoiding unnecessarily high premiums.
For these and other reasons, now can be an excellent time to get an evaluation so that you know the value of your business.