Reasons for Performing a Business Valuation

Why bother with a business valuation?

  • A valuation provides you with a realistic view of your business as it currently stands which empowers you to make more sound financial decisions.
  • For “start ups”, a valuation is critical to determine how much will need to go to investors in exchange for capital.
  • If you’re required to report to investors or stakeholders, a recent business valuation should be a part of that report to give them a clear picture of your financial health.
  • If you are contemplating the vast array of fundraising options now available to business owners you will need to know the value of your business first.
  • Owners looking to sell their business or merge in the near future must have a valuation performed. In fact, this should be the first step in your succession planning process because it can identify areas of the greatest value to use during negotiations. It can also identify any weaknesses that you can work to improve upon prior to the sale of your business.
  • A valuation could protect your business in the event something happens to you. For example, in the event of an owner becoming incapacitated or in the event of death, having a current business valuation would help the family deal with the potential sale or dissolution of the business.
  • If you are planning to add a new owner or partner you need to have a valuation performed to determine the buy-in price.

Generally, it is wise to have a valuation performed every few years. A thorough valuation includes several complex steps including a careful analysis of the company’s historical earnings and a calculated determination of a capitalization rate which corresponds to an appropriate rate for a safe return.

For more information about having your business valued call our office at 802.878 1963 (Williston) or 802.775.7132 or email [email protected]

Sources from:
Intuit QuickBooks, Suzanne Kearns
About Money, Jean Murray

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