Know now to prepare for tomorrow
When you started your business, you probably weren’t thinking about ever having to sell it. Regardless, you will exit your business one day, whether it’s on your terms or not.
While retiring and selling your business are among the best options for an exiting business owner, there are other reasons like failing health, divorce, and other bad circumstances that can encourage you to sell the business sooner than you would like.
I recommend all business owners have an idea of their company’s worth at all stages of their lifecycle. It’s so important. Most business owners have the majority of their net worth tied up in their company, so it makes sense to track its value in the marketplace.
Getting “your number” isn’t difficult to do. Everyone thinks their business is unique, (and they are) but all businesses have companies comparable to them in customer mix, employee count, revenue, and industry type. For all businesses, the market value has already been set.
98% OF BUSINESS OWNERS DO NOT KNOW WHAT THEIR BUSINESS IS WORTH.
– Ibis World Report
You may have heard the term “Certified Business Valuation.” This is a relatively formal and in-depth process where a Certified Business Appraiser (CBA) will collect data and issue a report worthy of a court of law scrutiny. Oftentimes, that’s why you get a formal evaluation. It can be used in cases of:
- Gifting shares of a business to children as part of a succession plan
- Merger or sale to another entity
- New shareholder or partner coming on board
- Raising investment capital
- Establishment or annual update of an employee stock ownership plan (ESOP)
- Divorce, or death of a spouse or partner involved in the business
- Estate planning
- Other legal disputes
The process to get a formal valuation can be lengthy and is always expensive. The larger and more complex the business, the more significant the price tag. Even the smallest of businesses may pay a few thousand dollars.
However, there is a quicker and faster way to learn what your business is worth. We call this an “Opinion of Value”. While less formal than a business appraisal, the information could be MORE reliable because it uses current and real-world sales data and it is based on putting a business on the “for sale marketplace” in the present day. If you’re thinking of selling, this may be all you need. After all, your business is worth only what someone is willing to pay for it at the present time.
Contacting a business broker is a great place to start. Unlike CPAs and attorneys, business brokers are working every day to understand company value and what buyers are willing to pay. A competent broker should be able to tell you what your company is worth using only basic information such as tax returns, number of employees, and historical performance. They can calculate the total owner discretionary income and compare that with other businesses that have sold recently. Brokers are in a unique position because they have access to sale data through professional organizations that others don’t. The process is quick (usually 48 hours) and can even be done gratis.
At Crowne Atlantic Business Brokers, we do them all the time for owners, and we’re happy to. I recommend after learning “your number,” having a conversation with your spouse or others close to you about your future. If you have plans to take that dream vacation when you retire or buy that farm in the country, this is where the conversation starts. It’s a necessary piece of information to do some life planning.
If after getting an opinion of value, you wish to obtain a higher value for your business, you are in luck. Crowne Atlantic Business Brokers can offer suggestions and tips that can help increase your business’s value and you can continue to build your business and set an exit number goal. You have control of your walk-away payday, But first, you have to know where you stand TODAY to start.
A certified business broker is an important part of your team when you’re preparing to sell. Look for one with experience and a long track record of success. You’ve spent a lot of time and energy growing your business – put it in the hands of a professional you can trust.
About the author: Jackie Ossin Hirsch
Jackie Ossin Hirsch is a licensed business broker with over two decades of experience.
As the founder of Crowne Atlantic Business Brokers, she has extensive business sales experience, including transactions involving stock, cash, seller financing, and SBA financing. She has worked on over 400 transactions and specializes in companies with a value of $1MM to $50MM and EBIT from $500,000 to $10MM.
She has produced over 360 business valuations and is a recognized expert.
Jackie has the distinction of being a Certified Business Intermediary (CBI) with the International Business Brokers Association (IBBA). Her perspective of being in the marketplace enables her to confidentially match the right buyer or investor group with the right business opportunity, ensuring a successful business transaction and business transition.
As a result of her dedication to her clients, Jackie has won numerous business brokerage industry awards from the Business Brokers of Florida (BBF), and has been a Million Dollar producer every year.
Jackie is a graduate of University of Florida. She also studied International Business at the University of Costa Rica while becoming fluent in Spanish.
As a Central Florida native, Jackie has intimate knowledge of Florida business locations, neighborhoods, infrastructure, and demographics. She has traveled to over 30 countries and is adept at relating to any buyer or seller. Se habla Español.