A recent survey conducted of US small business owners found that very few understood their business valuation, or had stepped into the process of appropriately planning for the company’s future. It is vital to understand the valuation of your company to plan for a sale, for estate and tax planning purposes, or to identify next steps in accessing capital.
Every few years, you should work with independent auditors to help value your business. Far too many small company owners are focused on other day to day aspects of running their company, but this recent study conducted by M&T Bank found that 98% of small business owners have not discovered the value of their companies in the last two years. This is a crucial part of small business succession planning.
Given that your company is probably the most valuable asset you have as a business, you need to understand how to value it. You can also be setting yourself up for success with future sales, but this these are not the only reasons to work with independent auditors for proper valuation.
Capital raising, issuing stock options, creating a buy sell agreement, obtaining business funding or evaluating insurance needs are just a few other examples of reasons why you should look into business valuation. Business valuation is also a crucial component of business succession planning. In business succession planning, you outline what you want to happen to your business after you step out of the company. It can be extremely important to articulate your goals and wishes in this way, and to work directly with an experienced and knowledgeable estate planning attorney to assist you with this process.