A Business Valuation is the only way to know your true Business Value
For many, the American dream includes owning a business and all that comes with it: freedom, independence, recognition and financial reward.
It is important to recognize, however, that intense concentration on day-to-day issues coupled with pride of ownership can result in a skewed assessment of the value of your business. To achieve your American dream, including your vision of Life Beyond Business,™ you need a firm grasp on the true value of your assets.
Let me share a story with you.
For many years, I owned and operated my own company. In my mid-forties, I was approached by a publicly-held competitor interested in buying my company as part of their national expansion strategy. They were pursuing me! I saw this as my opportunity to make some big bucks. I went to the dance thinking I was already the prom king. Over the next few months, they toured my place and I met with their top executives to discuss potential synergies.
I was on top of the world!
And I was determined not to leave a single penny on the table. After all, they were chasing me. I planned to start high and negotiate to a number that reflected the importance of my company to their strategic plan. I would finally cash in on the long hours, the financial risks, and the management headaches.
I made many mistakes in that negotiation, but the biggest was that I allowed emotional attachment to my business to blind me to the actual market value of the business. I had no real idea of what my business was worth. I estimated the value based on similar deals in my industry, none of which were in the St. Louis region. I thought I was a pretty good negotiator and decided that starting high was a good strategy.
But here’s the truth:
Most business owners think their companies are worth more than they actually are.
That business is your baby; you’ve spent countless hours nurturing it and risked everything to support it. All that time, energy and risk must make your business worth a lot, right? Unfortunately, that’s not the way it works. The value of any business is determined by existing market conditions; how much similar businesses have sold for, current economic considerations, estimates about the future of the industry and, in the end, how much a buyer is willing to pay.
An independent market valuation of your business is fundamental in planning your future.
The only way to find out whether you will be able to support your Life Beyond Business™ is to add the value of your personal assets to an independent business valuation of the after-tax value of your business.
If the amount you need matches the amount you can realistically expect to sell your business for…congratulations!
If it doesn’t, don’t give up!
There are several steps you can take today, preferably years before your transition,
to increase the value of your business and/or reduce the taxes you will owe on the sale. Either way, you end up with more money in your pocket.
In case you were wondering about the outcome of my dance with the strategic buyer, I started the conversation with too high an asking price and the music stopped. There was no deal and I missed a huge opportunity!