A business valuation can serve as an important tool for business owners. The associated appraisal report assigns a value to the business and explains in detail how that value was derived. The following are some circumstances where an owner is likely to benefit from a business valuation:
To aid in the sale of a business. Most small to mid-market business transactions involve bank financing which will require a third party valuation. Having a valuation performed prior to marketing a business for sale will aid you in establishing a reasonable price without leaving money on the table and will assist with validating the purchase price to both buyer and lender.
To assist with strategic planning. You and your financial advisors probably monitor the balances in your bank and retirement accounts and utilize this information to determine short-term and long-term strategies. As a business owner, your business is likely your most valuable asset. Ensuring that you are accurately informed regarding the value of such a significant portion of your net wealth should be of utmost importance to any business owner. Knowing the value of this asset and understanding the factors that impact value are critical for accurate strategic planning for both your business and your personal life.
To plan an exit strategy. By considering the current value of the business, the factors impacting valuation, the projected financial future of the business, and the owner’s ultimate goals, a business owner can estimate the optimal time to exit and can begin planning accordingly
To determine value for other purposes. Partnership buyouts, divorce, litigation, estate settlements, and gifting are examples of situations where an accurate valuation is critical.
Regardless of the purpose of the business valuation, it is imperative that it be performed by an independent appraiser to avoid any alleged conflict of interest. Apex Business Advisors can provide you with a reasonably priced business appraisal report performed by a professional, accredited third party appraiser. Talk to an Apex Advisor regarding your valuation needs.
