A business valuation is an investment most business owners should consider making. A business valuation is a procedure that is performed in order to evaluate your operation and then determine its estimated economic value. This service is carried out by a certified public accountant that holds the credential that positions them to gage the value of businesses based on a number of factors.
Many professionals believe that selling your business is really the only reason to have a business valuation performed. However, here are several scenarios that call for a thorough review of your business’ worth. Our firm has been performing this service for clients for many years, for many different reasons. Yes, if you are preparing to sell your business, a valuation will provide you with the numbers you need to a secure a deal that benefits both you and the new owner. But that is just one reason.
You will need to know the fair-market value of your operation in the event that you consider merging with another entity. Or, you will need to be armed with the right numbers if you plan to add a new owner to the business so you can set the buy-in amount for him/her. The same goes for owners and other shareholders that will be exiting the business.
What about your own exit strategy? Knowing the value of your business sets you up to create a better retirement plan, whether you plan to sell, pass it along or close up shop all together. Many times I work with business owners who must know the value of their operation due to a family-related situation. For example, business owners going through divorce proceedings often need to know the value of their business so they are properly informed during legal proceedings. Or, a family emergency comes into play and the current value of the business is as vital piece of information that is needed as the parties involved work towards a solution. Sometimes needing to be aware of the true value of your business has nothing to do with selling or leaving and everything to do with expansion. How you know just how far you can grow without knowing where you currently stand in regards to finances and value?
When looking for someone to assist your privately held enterprise with independent valuation requirements, you want to partner with a CPA with varied experiences and intense training in valuation theory as well as application, litigation support, accounting, tax, auditing, finance, insurance, economics and investments. There is no substitution for experience, so you will want to secure a firm that routinely performs business valuations. As always, contact me with any questions you may have.
Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs. Brian has been with Holbrook & Manter since 1995, primarily focusing on the areas of Tax Consulting and Management Advisory Services within several firm service areas, focusing on agri-business and closely held businesses and their owners. Holbrook & Manter is a professional services firm founded in 1919 and we are unique in that we offer the resources of a large firm without compromising the focused and responsive personal attention that each client deserves. You can reach Brian through www.HolbrookManter.com or at BRavencraft@HolbrookManter.com.