What is the Value of a Business Valuation?

Introduction

Too often Business Owners think they will get a Business Valuation only when it is a necessity:

1. Buy-sell agreement
2. Subchapter S conversion
   
3. Shareholder dispute
4. Forced restructuring
5. Death of a partner
6. Divorce
7. Event causing lost profits or damages
8. Bankruptcy

However, there are many times when an independent Business Valuation is invaluable:

1. Seeking investors or a new banking relationship - a solid Business Valuation will expedite the due diligence process and set the tone that the assumptions you are presenting have been validated by an independent third party.
   
2. Paying employees with "Phantom Stock" - if cash is tight, you can provide employees with an incentive based on business improvement.
   
3. Buying a business - validating the sales price will help obtain bank or other financing.
   
4. Selling a business or a division - reflecting the real market value will expedite the process.
   
5. Gifting shares to employees, relatives or charities - will allow you to conserve cash while meeting your employee bonus goals, family gifting or charitable obligations.
   
6. Establishing a joint venture - with the real value of your business will make negotiations more realistic.
7. Assessing capital markets options - sale of business or ESOP or IPO or Private/Equity or Franchising, and other, each reflect a slightly different market value.
   
8. Benchmarking and Adding Value - will ultimately help you maximize the value of your business.
   

Steps

While a Business Valuation will help the Business Owners understand and put in perspective the worth of what is probably their largest asset owned, it is critical to:

1. Make the Enterprise Value (or what public companies call "market cap") part of assessing management and the goals and objectives for periodic accountability (usually annual, but could be quarterly).
2. Create a Blueprint for Building Value to understand your business's value drivers, financial data, and capital markets options.
   
3. Design a Liquidity Roadmap to identify by maximizing the opportunities to obtain liquidity for the business or the Business Owner. and achieve your financial, personal and estate planning goals.
4. Consider a Strategic Plan for Value Growth to create new and power existing value drivers by continually integrating Financial Performance, Customer Knowledge, Internal Business Process, and employee Learning and Growth. 
   

Conclusion

These types of endeavors provide clarity, certainty and peace of mind to the Business Owners, empowerment to key employees, and maximize the collective knowlege base by your advisors working together.