With the day-to-day demands of running their businesses, most owners put off getting a valuation until a sale is imminent. But some are starting to treat the act of valuing their business as an integral part of running it.
Has anyone asked you what your business is worth? Have you pondered that question yourself? As a business owner, you should not only know what your business is worth to you, but also what your business is worth to a potential buyer. In other words, you should know the value of your greatest asset and boldest venture, both personally and on the open market. There may come a day when you need to sell or pass down the business, and knowing the numbers today will help you make better business decisions in the future.
Valuations are difficult for business owners because there are so many variables to the process. That said, the ability of a business owner to fully understand their business from the outside – as the owner of an asset or as a prospector on the market – rather than from within the immediacy of running the business, is fundamentally important to managing the business well today and in the future. According to The New York Times, business owners are increasingly coming to terms with these issues. Their recent article, “Do You Know What Your Business Is Worth? You Should,” suggests that while most business owners put off getting a valuation until a sale is imminent, many are starting to treat the act of valuing their business as an integral part of running it. For example, valuations -- whether performed by your accountant on an annual basis or with the assistance of sophisticated software tools -- can help business owners pinpoint management practices that may be undermining business value. Isolating those variables, and acting on them, can drive your valuation higher.
Being that it is “tax time,” take advantage of the opportunity to crunch numbers with your tax advisor and start getting a handle on the true value of your business. You never know what tomorrow will bring!
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Reference: The New York Times (January 30, 2013) “Do You Know What Your Business Is Worth? You Should”