Well, the obvious answer is so that you know how much to ask for it when you are ready to sell.
But what about today? Do you know what it is worth right now? When I ask business owners about their business value, I often get an answer that goes something like this: “Oh I don’t know, I have at least a few years to go before I am ready to sell. So, why should I care about that now.”
Having an exit plan is critical. With your advisors in place, the next step is to know what your business is worth today.
- What if someone approached you today with an offer to buy your business? Would you know if it was a fair offer? (And don’t say you wouldn’t sell! If that check was big enough…)
- What if you have to sell before you are “ready”? Accidents happen, health issues happen, the economy has its ups and downs.
- If you have a target value in mind, how do you know if you are on track to achieving that business value for your exit? Understanding your value today can serve as a benchmark to track growth toward your target exit value…and signal a problem if you are not growing as you need to for an exit when you want to leave.
The Bottom Line
Know your business value! Get a simple valuation done and develop a game plan with specific targets and timelines. Implement each step in the plan and monitor results at least monthly to ensure you are on track. Update the valuation annually to make sure you are ready when the time and money are right for YOU!