Why Value a Business? By Samantha Dean from MCS Advanced Business Solutions on Apr 14, 2014
Business owners most often request a valuation when a decision is made to sell the business. For most SME owners aside from the family home their business is their most valuable asset. What many don’t realise is that their business may be worth far less than they think. For this reason it is vitally important business owners understand the value of the business, how it is calculated and how to improve it.
Having a clear understanding of what a business is worth provides the owner with the clarity and knowledge to make informed decisions.
Let’s look at the benefits:
- The ability to accurately identify and quantify which business activities are creating value and which are not.
- Recognition of which drivers affect business value and therefore should be focused on.
- Having an accurate indication of how the business compares to other businesses in benchmarked areas.
- Being prepared for unexpected circumstances:
- Health issues or death of owner
- Offer to purchase
- Relationship breakdown
- Partnership dissolution through disagreement, illness or death
- Business opportunities requiring capital financing
- Being prepared for the future
- Retirement is planned in the next 2 – 5 years and the value of the business and any areas of possible improvement need to be identified in order to construct an exit strategy.
A business valuation is clearly an important tool for business owners to plan for the future. Proactive advisers recognise the need for their clients to have the most up-to-date and accurate knowledge in order to make the right decisions for their businesses. As advisers we are also aware that using the knowledge of outside specialists in key areas allows us to offer our clients the best possible service while remaining focused on our core business.
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