When Should I get a Business Valuation?
Startup Business Valuation:
Know your numbers
Know your industry
Organization and tax consulting
Separation-proof your company
Mid-life Business Valuation:
Separation-proof your company
Mature Business Valuation:
At each stage, it is important to know:
Where you are
How you compare to your industry. Potential buyers pay more for better numbers. They compare your business to others in the industry.
Why Get a Business Valuation Now?
Forbes Magazine article (February, 2017) “Many owners probably won’t be able to sell their businesses when they’re ready, because they’re not taking critical steps toward a transition or toward getting the full value of the enterprise. Many owners have little to no exit planning in place, even though many of them have 80-90% of their financial assets based in the business itself. Only about 20-30% percent of businesses that go to market end up selling. 88% have no written transition plan. 70% do not know what after-tax income they need to support their lifestyle. Less than 40% of businesses have not had a valuation in the last 3 years. Two-thirds agreed that “Getting full value for my business to fund retirement or other business interests” was their top goal in the transition of the business. Business owners on the television show “Shark Tank” often estimate the business’s value way above the estimates of the “sharks.”
Other Reasons For a Business Valuation
Know your business
Understand the value (worth) of the business, your largest asset.
Set a base line value for the business to develop a strategy to improve the profitability of the business and increase the value of the business for an exit strategy.
Your retirement depends on it.
Exit strategy planning purposes
A valuation should be done far before the business goes up for sale on the open market because you will have an opportunity to take more time to increase the company's value to achieve a higher selling price.
Refocus the operational efforts to improve profitability.
Basis of value
Set a basis of value for a business when no valuation has been previously performed.
Show company valuation growth to potential buyers. Potential buyers like to see that a company has seen regular, consistent growth as it ages.
Obtain bank financing or alternative investment. Get access to investors.
Identify whether the business is growing, stagnant or declining in value to restructure the business.
Ensure your business and family are protected.
Stock Options - Employee Stock Incentive Programs (ESOP)
Tax Allocation and Tax Reporting
Valuing Intangible assets (805a)
Value a portfolio of IP – patents, trademarks, copyrights, proprietary processes, etc.
Justify the per share equity value in a company for annual shareholder meetings
Determine the potential built-in-capital-gains tax in a conversion from a C-Corporation to an S-Corporation
Buy-sell purposes and funding the agreement
Goodwill impairment analysis
Determine IP value
Allocate the purchase price after an acquisition of a business
Estate tax reporting
Gift tax planning