"When I retire... someday" is a common response from business owners when asked about their business's value. But with 70% of small business owners' wealth tied up in their companies, it’s crucial to know your business’s worth—especially if it's your retirement plan. Without this knowledge, how will you plan for retirement or the lifestyle you want?
Understanding your business’s value provides more than just retirement insights.
Here are some of the key benefits:
1. Increase Business Value
What gets measured, gets improved. A thorough business valuation not only reveals your company’s worth but also helps identify areas for improvement. It provides insights into whether your efforts are paying off or need adjustment. This data helps guide strategic decisions, shape business development plans, and assess if your team is set up to support long-term growth.
2. Capital Infusion
If you're seeking external investment or a loan, lenders and investors will evaluate your business plan, agreements, and valuation before making decisions.
3. Mergers, Acquisitions, or Share-Swaps
A solid business valuation is essential during negotiations for mergers, acquisitions, or share-swaps, providing a fair baseline for all parties involved.
4. Dissolution or Partial Exit
If a business partnership dissolves or an owner exits, a valuation will help determine a fair and equitable split of interests, whether through share redistribution, buyout, or dissolution.
5. Divorce
Since business interests are considered marital assets, they may factor into divorce settlements. Independent valuations provide essential clarity for fair proceedings.
6. Tax Strategies
A current business valuation can unlock tax benefits you might otherwise miss, especially for estate tax settlements, capital gains calculations, and tax disputes
7. Employee Incentive Programs
For Employee Stock Ownership Plans (ESOPs), companies must disclose their value to satisfy annual requirements.
8. Insurance Planning
Most small businesses (about 70%) are underinsured. Without knowing the value of your business, it's hard to gauge adequate coverage. Additionally, a historical valuation could help recover losses if you're injured or diverted from the business.
So, why do many business owners avoid getting a valuation?
Often, it's due to outdated perceptions of the process being long, expensive, and intrusive. However, with new technology, valuations are now quick, affordable, and far less invasive. Online valuations can be done in minutes and cost a fraction of traditional services.
With so much at stake, why wait?
There’s no time like the present to discover your business’s value.
Our firm is dedicated to helping small business owners meet their financial goals, and business valuations are a vital part of that process. Ready to get started? Contact Motta Financial Today!
This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and objectives of any specific investor. Motta Financial, which earns fees when clients select its services, is not offering impartial advice in a fiduciary capacity in providing this educational material. This information is not meant as tax or legal advice. Investors should consult a professional advisor before making investment and financial decisions and for more information on tax rules and other laws, which are complex and subject to change.
