Often, small and medium-sized business owners rely on the sale of their business to help fund their retirement. At some point in the future you will be looking to unlock the wealth in your business – so don’t you want to know what it’s worth? Of course, there are significant risks associated with simply guessing at its value. Essentially, guessing at the value of the business means that you could be guessing at your future retirement income. That’s not exactly the best way of ensuring a comfortable future.
Knowing the value of your business is also important for collecting metrics to measure your improvement initiatives within the business. You need to have a benchmark – knowing what your business is worth today in order to see whether or not it’s growing – and whether the current improvements you have in place are adding value to it. Once you’re able to compare your business’ value at two points in time, you can uncover whether you’re meeting the growth rates you expected, or identify key areas that may be holding you back from achieving the value of the business that it’s capable of attaining.
There are several methods of completing a business valuation and there are times where a full-blown business valuation is not required. All business owners should have a general understanding of what their business is worth – which often means consulting with a third-party professional to confirm your thoughts. What you originally paid for a business, how it was originally valued, or what you think it should be worth doesn’t necessarily factor into the bottom line. Of course, in an ideal world, it will be worth more than you ever imagined. But if it’s not, wouldn’t you rather know that today while you still have time to do something about it? Take control of your future – you’ve earned it!