Benefits of Obtaining a Business Valuation Early
A business valuation is the process of determining the economic value of an organization. It is part art and part science. Many business owners or directors obtain business valuations when a triggering event takes place and many hold the notion that it’s that thing you do just before you are about to sell your business right? Not exactly!
There are many reasons why you should figure out the value of your business at least 2 to 3 years before you even start thinking about selling. It could be the difference between a successful and profitable exit/buyout, or not.
When used as a proactive strategy, a business valuation can provide many insights and benefits, it helps in terms of thinking, planning and taking steps to maximize the value of the organization to a potential buyer. Through the valuation process, key value drivers and business risks are identified and quantified to arrive at a notional business value. Where shortfalls and above average risks are present, the early valuation provides the opportunity to mitigate those risk and improve on the key value drivers before the business is exposed to the open market for sale.
In The e-Myth, Michael Gerber says, the only reason to own a business is to sell the business. Although it is a bold statement, and many organizations are not run that way, it is a good mindset to adopt years prior to thinking about an exit. Running the business this way is going to maximize value to a potential buyer; when you build and run a business with the mindset that you are going to sell it, you operate differently than if you are building it to pay the bills.
A current evaluation of your business is enormously valuable to a business owner. However, by virtue of being a business owner it means you are extremely busy. A business valuation now, helps you stop and gain an independent perspective of what the current value is, what the value drivers are, and allows to plan smarter for the future.
If you don’t know what the business is worth now, how can you plan for the exit and ensure you attract a buyer who will pay what the business is worth?
Get a valuation done early, operate and build the business with an exit in mind and you will ensure the business will sell and garner top dollar when the time comes.
If you would like to discuss an early valuation or strategies to maximize your business value, please give us a call or send us an e-mail. The initial consultation is always free!
Malahat Valuation Group