What is the Purpose of a Business Valuation?

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Many business owners spend years running their business without asking one of the most important questions; how much is my business actually worth? 

This question is extremely important for a number of reasons. Whether you plan to sell your business in the future or continue running it until you retire, you should consider getting a business evaluation. 

It will tell you things about your business structure that you aren't aware of. Plus, it can point you in the right direction if you do want to eventually sell a business, bring on partners, or acquire another business. 

There are multiple business valuation methods and many different business valuation companies. Below we cover the purpose of a small business valuation and why you should get one, so keep reading if you are a business owner. 

How Much Is Your Business Worth? 

You've built your business from the ground up. You've poured countless hours, sleepless nights, and your life savings into your business. 

And it works. You're able to do meaningful, enjoyable work, pay your bills, provide jobs to others, and serve your community. What's not to feel good about? 

But what would happen if you couldn't run your business anymore? What if you got sick, or you had to move in order to take care of your family? Or what if you wanted to retire? 

Would you be able to sell your business? Many business owners are shocked to find out their business isn't worth much. It's not uncommon for the only real asset small businesses to have is their real estate, if they even own that. 

But if you build your business properly, implementing best practices, systems, and processes, and building a true asset, your business can be worth so much more. 

But how do you even know where to start? Get a business valuation. Business valuation services will tell you how much your business is worth today while providing a road map of how to grow your value

Why Get a Business Valuation? 

The most obvious reason to get a business valuation is if you want to sell it. If you're looking to sell and move on, whether to retire or start a new project, you first need to know how much it's worth. 

This will be the first thing potential buyers will need to know. What the selling price of the business is, what are the assets they will be purchasing, and how much it's actually worth. 

But selling isn't the only reason to evaluate a company. Determining appropriate partner ownership of the business is another reason to have your business evaluated. 

In the unfortunate event of divorce proceedings, this might also need to take place. Some tax-related events, such as selling shares, may also require a business valuation. 

Those looking to have their business evaluated by certified professionals can get started with a valuation calculation. 

A Roadmap for Your Future 

You can't run your business forever, though many business owners live as if they can. Eventually, you'll need to step down and move on, in whatever capacity that means for you. 

Before you get to that point, it's important to prepare for a strong exit. The best way to prepare is to get a business valuation. This will provide guidance on how to improve your companies actual market value long before you should ever need to sell. 

Looking for additional insight on growing your business or selling a company? Be sure to read more of our Bootstrap Business Blog today to learn more about business valuation calculations and exit strategy planning.

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