Chicago M&A Advisory Firm

9 Reasons You Need A Business Valuation

Our Integrated Process Ensures Maximum Value For Our Clients!

February 13, 2019

Do you know the value of your business? Surprisingly, many entrepreneurs do not make the time to measure the value and potential of their business annually.

You have worked hard to build this asset, and you should know the value of your hard work in the present and for the future. Most of us visit our doctor annually to get our vitals checked and prioritizing your business in this manner is just as wise.  Here are nine reasons you need a business valuation, whether you want to acquire a business, plan for succession or sell your company.

  1. Understand Your Current Business

Create a baseline value for your company to know where you stand in the marketplace. Know how far your company has come since its inception. Understand how your company competes in the now.

When you measure this data, you can quantify it in a more meaningful way that motivates both you and your employees toward future growth.

  1. Understand Potential for Growth

A business valuation helps establish a baseline value which enables you to create more informed financial goals, business strategies and marketing objectives. Annual business valuations allow you to understand your company’s potential for growth and innovation.

  1. Plan Your Retirement

Nearing retirement age? Given thought to an exit strategy? Unfortunately, you cannot exit stage left and take a quick bow.

As with anything in business, you need a plan. Waiting may mean that you end up rushing to close or sell your business and get less back than you put into your business. That is not fair to you, your employees or your business.

You want flowers or maybe a nice steak dinner — not tomatoes thrown at you — before you set sail into the sunset of your retirement years. Make sure those years are golden, not tarnished. A business valuation helps you plan your exit strategy with less worry for all.

  1. Ensure Proper Protection of Your Asset

Knowing the real value of your most prized asset allows you to protect it best. You need to protect your business as it operates, but life can also get ahead of you. You must protect your business in case of taxes, legal challenges, death or divorce, and in divorce, the appraisal of the business as an asset will come up.

  1. Develop a Succession or Sale Plan

Plan ahead before you make your succession or sale plan — a pre-plan if you will. Succession is all about planning for success. Many business owners plan their succession out with a timeline covering at least five years to a decade, and that will include receiving annual business valuations to stay on track.

A business valuation helps you weigh the pros and cons through assessment before succession or making a sale. You can look at what you need to improve in the business or realize more aspects of your mission before passing the reins on.

  1. For Buy-Sell Agreements With Partners

What happens when one of your partners wants to sell their share? Buy-sell agreements can disrupt the company, particularly when that company is small, but it keeps the business in the hands of the current owners and can make the transition smooth when you have a business valuation.

If an owner becomes permanently injured or wants to retire, buy-sell agreements with partners help determine how the buyout will be funded along with other terms, to reach a fair agreement. Annual business valuations can help companies revisit buy-sell agreements to keep them updated.

  1. To Work With Lenders

Your business may hit a rough patch. You may need an extra financial push to grow. Maybe you are ready to acquire a new business.

Lenders often require a business valuation before signing off on loan, depending on the size and type of business. Specialized businesses may face more unique challenges in the economy and their respective markets, so values understandably shift. A business valuation helps the lender help you.

Banks may reduce your loan to value ratio if the state of your industry is uncertain or “shaky.”  You might need to produce more security. Getting a business valuation now with an M&A advisory team helps when working with lenders.

  1. Trust/Estate Planning

Your business worth determines what kind of tax planning you need to do for your estate. Does your the value of your assets and business exceed the federal estate tax exemption total?

Getting a business valuation now makes it easier for tax time and can maximize what your heirs receive after taxes.

  1. Strategize for Future Acquisitions

A business valuation lets you know where you stand now and your company’s potential for growth, including developing strategies for future acquisitions. Make the proper adjustments to prepare to meet with lenders with your mergers and acquisitions team and develop your talent in the right direction.

A business valuation helps a company determine its next move. Business owners finding themselves at a crossroads in growth or retirement can seek the assistance of Sun Acquisitions experienced M&A advisers to appraise the company and strategize for the future.

Free Confidential Consultation

Our advisers will provide a complimentary and confidential consultation.

SCHEDULE A CONSULTATION