Why (and how) Should I Value my Business?

Most business owners only value their business when they are thinking of selling their business. This short blog argues that a business valuation should be done throughout the life of a business. This will help guide the owner to focus on the broader issues that drive the business valuation as well as building a business with more sustainable profit growth.

Two Reasons to Value your Business:

1. The business could provide a substantial lump sum/pension when the business is sold. Optimising the profit and attractiveness for the business takes time and it pays to start early. Understanding what makes a business attractive to potential owner is a very useful exercise. Fundamentally any buyer is looking to acquire a business with sustainable and reliable profit growth. This is exactly the same as the wants as any owners wants for their business.

2. A business valuation encourages the owner to take a long term and more strategic view of the business. Of course the main focus of the business owner is managing the day to day issues and driving the business forward. But just occasionally it is helpful to stand back from the business and examine the broader strengths and weaknesses of the business. The business valuation will effectively provide an owner with an external perspective of the business. This “helicopter view” will enable to see their business as others might see it, and provide pointers to improving the long term profitability of the business. Read here the 8 Aspects to Increase Business Value. 

Valuing a business can be something of a dark art, and indeed there are many issues that can subtly influence what a business could be worth. Ultimately of course only a buyer can say what the business is worth to them. However, CMC Partners can give a guide to a business valuation, and highlight areas where the business could be approved, allowing you to benchmark against other similar businesses. To find out more get in touch. It is a pretty easy first step, and is guaranteed to provide an owner with some food for thought!

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