4 Reasons to Perform a Business Valuation

Guest Column By:

By Douglas Smith
SVP, Community Banking Sales Director
Sun National Bank

Of the 28 million small businesses in the United States, many have owners who don't know the true worth of their company. But knowing the value of your business is an integral part of the planning process. Here are 4 reasons you may want to have a business valuation performed:

1. Secure Your Future
With a business valuation, you can develop a retirement plan that accounts for the money you'll receive from your business's future sale or revenue, helping you build a secure retirement for both yourself and your employees. 

2. Develop a Succession Plan
A current and accurate business valuation is a critical component of business succession planning. If you plan to sell the business to a family member or business partner with a buy/sell agreement, an accurate valuation will help inform funding decisions. Having a plan in place can ensure that the business is continued or exited on your terms.

3. Know the True Value
A comprehensive valuation can help you determine how well your business and personal retirement strategy are performing. 
    • If the valuation is lower than expected: Ask yourself, what do you need to do to reach your retirement goal? The answer may be to invest more in business operations or contribute more to your personal account.
    • If the valuation is higher than expected: You may have key employees that are growing the business. Consider ways to protect the company from financial loss should those key people quit, retire, become disabled, or pass away.
4. Determine a Sales Price
Guessing at the value of your business may scare away buyers with a price that is too high or leave money on the table with a price that is too low. A valuation can also help you identify key areas of value that you can use in negotiations.

The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.