KNOWING
&GROWING
The
this is part one of a six-part series about how you can know what your
business is worth and how you can ultimately grow its current value.
How Much Is Your Business Really Worth?
A
65-year-old business owner started to think about retirement, as many 65-year-old
business owners do. He figured he would sell his business to his daughter, who
had no liquid savings. Because of his accountant’s value calculation, which was based
on “a rule of thumb,” he expected his company to be worth $2.5 million – and to enjoy the
retirement lifestyle of his dreams, he needed every penny of that. But after having a
professional business valuation conducted, he discovered that his business was worth less
than $1 million.
If he had a clear picture of what his business was really worth five years sooner, he would
have probably done things very differently. Rather, he was forced to drastically change his
retirement plans.
How A Business Valuation Can Work For You
Imagine the shock, and sometimes horror, of finding out that the path you are heading down
isn’t what you thought it would be. Unfortunately, this happens to entrepreneurs every day.
They think they have a good idea of what their business is worth, but alas, they are pretty
far removed from reality.
Several family business surveys have found that the majority of business owners don’t really
know the value of their business. As a result, many business owners fall into one or more
of the following traps:
By Tim McDaniel,
CPA/ABV, ASA,
CBA, director of
business valuations
(Dublin office)
•
•
•
•
•
Make a retirement assumption, based on faulty data
Sell their business at the wrong price or at the wrong time
Don’t pay attention to the timing of any gifts for their succession planning
Pay more in taxes
Don’t understand the key valuation drivers and don’t make concrete plans
to grow the value of their business
This is where a business valuation comes in.
As a business owner, you really need to have a starting point and know your business’s
value. Guessing shouldn’t be an option.
‘Have To’ Valuations Versus ‘Need To’ Valuations
5