A preliminary company valuation report, prepared by an appropriate professional (Chartered Business Valuator), gives business owners a fairly good idea of how much a company is currently worth. It is strongly advised to have a credentialed (certified) valuation specialist on the Exit Planning Advisory Team.
In Exit Planning, advisors use the preliminary company valuation and the five-year cash flow forecast to determine what type of vehicle will carry owners to their destinations. A preliminary valuation costs money. Therefore, the owner’s immediate question is, “Do I really need a valuation before I start selling or transferring ownership?” The answer, almost always, is “Yes.” Owners really should know what their businesses are worth. They need to know the value because they want to receive full fair market value when they leave their businesses. The valuation also tells the advisor and business owner how much business growth needs to occur to meet the ultimate financial objective at the departure date. After obtaining a preliminary value, the business owner may realize that no growth needs to occur, or conversely, that business value needs to increase greatly—perhaps postponing the date of departure.
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