17-11-2012, 06:03 PM
Business Valuation White Paper
Business Valuation.pdf (Size: 68.34 KB / Downloads: 34)
When business owners first meet with an exit
planning advisor, they are often surprised that
one of the advisor’s first recommendations is to
obtain a certified valuation of the company.
Owners usually react in one of the following
ways: “Now? I’m not planning to leave for
years!” or “I know what this company is worth. I
built it!”
Before you jump to any of these conclusions,
understand that using the services of an
experienced business appraiser to value your
company as you transfer it to successors may
help you avoid an unpleasant encounter with the
IRS and help you to reap all of the value of your
life’s work. It also is important to realize that
obtaining a value helps to dispel many of the
common misconceptions that owners have
about the value of their businesses and what the
values mean to their overall exit plan. For
instance, if an owner feels that his or her
business is really worth, say, $5,000,000
according to a rule of thumb or based upon what
a similar business sold for, that owner may be
reluctant to move forward with Exit Planning
because he or she wants or needs twice that
amount to feel financially secure. Likewise, an
owner may believe the business to be worth
$10,000,000, an amount sufficient to meet his or
her financial security goal, and therefore
believes no additional planning is needed.
However, the owner may later discover when
the business goes to market that it is only worth
half that amount. At this point, it is too late, or
the owner may be too burned out to spend the
time, effort and money necessary to grow
business value.
CONCLUSION
The transfer of your ownership interest is the
final act in your business career. Doesn’t it
make sense to be certain that everything has
been done to maximize the value of your life
work?