Should My Small Business Be Valued?

Business women and partners are analyzing the company's marketing plan with calculator on wood desk in the workplace.

Business valuations have garnered the reputation of being primarily for large corporations looking to sell, mergers and acquisitions, or for start-ups seeking funding. The process of ascertaining the economic value of an organization is complex and often complicated, which can deter small business owners from taking it into consideration at all. Additionally, a large portion of small business owners believe that valuing their company is unnecessary. With endless to-do lists and a business to run, owners tend to neglect viewing their company from the outside in, focusing exclusively on the business internally. This can be a very costly mistake long term. In fact, research and history have proven that hiring an outside company for a professional, independent valuation is essential, even for small businesses.

Small businesses and family businesses typically have the shared mindset of “what’s the point of valuing my business?” From the surface, it would seem that organizations who are not looking to sell or restructure do not need to determine their value. But the reality is that business valuations are incredibly important for businesses of all sizes. Let’s take a look at a few of the most notable reasons why you should get your small business professionally valued sooner rather than later:

  1. Paints a thorough picture of your business as it relates to the industry as a whole, identifying where you stand against your competitors.
  2. Creates a baseline understanding of the business’s value and removes any unrealistic expectations of its worth.
  3. Whether it’s for a bank loan or from the IRS, your business will likely need to be valued at some point in time and getting ahead of this is critical to having an accurate view of your business. Hire a professional to do this before someone else does.
  4. Learn where your company is in the industry cycle, this is especially important if looking when to exit.
  5. Use valuation results in deferred compensation arrangements.
  6. Identify where you stand in regard to your retirement. If your business is your retirement plan, make sure you know the dollar amount associated with that.
  7. Utilize valuation insights to improve upon business and prepare better for a future exit.
  8. Your estate planning often hinges on an accurate valuation of your business.
  9. If considering selling, there is no better defense than determining the real value of your company.

All in all, every single business owner should add “obtain a professional valuation” to their to-do list. From the ability to accurately measure growth to gaining a thorough understanding of the business as a whole, business valuations offer beneficial protection and information to any organization. At Ellrich, Neal, Smith & Stohlman, P.A., our trained valuation analysts have the qualifications and experience to value a business for a variety of purposes. Contact our Palm Beach Gardens or Miami office today to learn more!