Do you know what your business is worth? If you’re like many
business owners, the answer to this question is probably
”
no.
”
That’s because business valuations can be both time-consuming
and costly. Even so, there are many instances when it’s important
to determine the value of your company.
Do you know what your business is worth? If you’re like many business owners, the answer to this question is probably “no.” That’s because business valuations can be both time-consuming and costly. Even so, there are many instances when it’s important to determine the value of your company.
Anyone considering selling a business should first have it valued. By doing so, you’ll help ensure that you don’t sell your company for less than its worth. Plus, knowing its value helps prevent you from setting the price and your expectations too high.
The same holds true if you’re selling a division, territory or product line. It’s not uncommon to have a valuation prepared for just a segment of your business.
Looking to bring new partners into your business? Having your business valued by a third party is a fair way to set the buy-in price.
If you already have partners in your business, you should have a buy-sell agreement in place, detailing what happens if one of the owners dies, becomes disabled, retires or wants to be bought out.
Generally, buy-sell agreements dictate when and how your business needs to be valued.
Business valuations are also a key ingredient in your estate planning and succession planning. Without knowing the fair value of your business, how can you ensure that there will be enough liquidity to pay estate taxes and to allow for a smooth transition to your successors? Plus, if you’re gifting shares of your company to your family members, charities, or other people or organizations, being able to substantiate the value of the shares given is a must.
Barbara Andres is a CPA and a partner with the accounting and business consulting firm of Bianchi, Lorincz & Company in downtown Hollister.
