If you think it doesn't matter how much your business is worth, Bill Richardson and Bob Overbaugh of accounting firm D.G. Sisterson & Co. LLP advise you to think again.
"The problem," they say, "is that too many business owners don't take the concept of business valuation seriously. You can't just look at the company's balance sheet, earnings, assets, liabilities and what's showing on the books and say that's the value of the business."
They cite five "very important" reasons to consider a business valuation:
- Completion of a business valuation is mandatory to complete your estate planning properly if you own a business individually or as part of a partnership.
- You need one if you have any plans to use stock in your company for gift purposes.
- If there are multiple owners, it's needed in the event of a death or if one of the partners wants out.
- It may be needed to settle divorce proceedings because the valuation could affect alimony, possible control of the company and the impact on any buy-sell agreement among partners.
- Obviously, if you're in the process of buying or selling the business, it's needed for the lenders.