5 Reasons Why You Should Get a Business Valuation

INTRODUCTION:

Do you really know what your business is worth? Is there any point knowing its true value? Having worked with many clients over the years performing business valuations Sydney it's clear that unless the owner understands what drives a business valuation up, the process to get change to occur for the better and to prepare for maximum sale becomes much harder. Here are 5 key reasons why you should get a business valuation.

Reason #1 - You Want to Sell Your Business as Part of Your Retirement Plans

If you think that you will need to sell your business to help fund your retirement, you should get a business valuation now so you can work out any shortfall (if any). If there is a shortfall you can either revise your retirement lifestyle or start to make changes to get your business value  up to where it needs to be.

Reason #2 - More Valuable Businesses Make Higher Profits Consistently

Whilst there a number of ways to value a business, generally businesses will be valued by business valuers on their profitability. Most Small to Medium Enterprises will be valued on a multiple between 1 to 5 times after add backs to various line items (e.g. reasonable salaries, market rate of rent etc). If you focus on getting your business to be more profitable it's effectively a double whammy. More profits along the way and a much bigger sale price at the time of sale!

Reason #3 - How Much Capital Gains Tax Will There Be on Sale?

Before you sell, you want to know how much capital gains tax there might be on the sale and whether you can access the various reductions that might be available under the Small Business Rollover Concessions. Knowing how much you will walk away after tax could change your mind on how much you are prepared to sell the business for.

Reason #4 - Getting Cheaper Finance

Whilst the banks generally prefer bricks and mortar as security, they will tend to offer cheaper lending rates where your business can show real value. For some industries and professions they will accept the business itself as security provided it also has a high business valuation.

Reason #5 - Learn What Potential Buyers Are Looking For

Once you understand what buyers are looking for when purchasing a business, work hard on those areas so that your business becomes easier to sell. Some things may be obvious but others not. Remember, the less reliable the business is on you as the owner the better. Have solid management systems in place including a plan on how the business will grow. Buyers will tend to pay higher prices for all of these types of things.

Don't assume you know what your business is worth. Unless you are clear as to what it might be realistically valued at, you should consider getting advice or you might find yourself having to put off your retirement by another 5-10 years when the time comes. If there is a shortfall in your expectations, now is the time to correct the things that will help push up the valuation.