“What’s my business worth?” is what every owner wonders.
Don’t guess. Most owners have a mental estimate of what they think their businesses are worth, based on their financials and market situation. It is just a guess, however. Making decisions based on incorrect assumptions and incomplete data will set you on your path toward your desired future.
Truth gives clarity. You need a valuation based on true data and market conditions. You want a sharp picture of where your business is today. It doesn’t benefit you to fudge or lie about the data that goes into creating your valuation. Start with truth and you’ll be better equipped to improve your business with every decision you make. That’s why we advise our clients to start with a simple valuation and revisit it regularly as you grow and improve.
Decisions must be based on your own data and situation. If your competitor or neighbor sold for a certain price, it doesn’t necessarily apply to your situation. Selling a business is not like selling a house. There are many elements that affect the price, including the terms, equipment, real estate, and the role of the owner after the sale.
Work your way up as needed. There’s no reason to overpay for a valuation at this stage. You do want an expert valuation. It should be done by someone who understands the industry and your market and who does not have a vested interest in over- or under-reporting the results.
Leverage your report. In addition to that big number that every owner is curious about, your business advisor should go over all the sections of the valuation with you so you can make the most of the report. The insight you can gain from the valuation process will pave the way for the next ten years.
Many factors affect your valuation. Your valuation should give you a deeper understanding of your entire company, your customer situation, a picture of the marketplace, and the factors that positively and negatively affect the business.
Take action. If there is a gap in what you thought the business is worth and what the valuation says, the time to address that is while the information is fresh. Don’t just throw the report in a drawer and pray that the next one will be more in line with your hopes.
Your ten-year horizon to selling or transitioning out of your business requires planning. You must base your planning on accurate information and an overall picture of what your business is worth. Don’t guess, hope or wonder -- start with a valuation and get the answers you need.
How many years do you have until you sell your business or hand it down to the next generation? Do you have a solid plan? Is everyone on board and pulling in the same direction? Rock LaManna is a professional advisor who helps owners make better decisions about the future. Your success starts with a trustworthy expert with years of experience and proven results in our industry. Visit rocklamanna.com or email Rock@RockLaManna.com for a confidential discussion about your ideal situation and timeline. Buy, sell, grow -- let’s go!