Rock, what’s my business worth?
I get this question All. The. Time. As you launch your plan to retire or exit from your business, much of what you do in the next five years depends on your business valuation. The decisions you make and the way you position and grow your company will be informed by the insights you gain from this important document.
Don’t guess. You probably have a mental estimate of what you think your business is worth, based on your financials and market situation. You probably have a number that you need for retirement or the next stage of life after you sell your business. This is important information for your exit plan, but wishes and guesses do not constitute a valuation. Furthermore, making plans and decisions based on incorrect assumptions and incomplete data will set you down the wrong path.
Truth gives clarity. A valuation must be based on true data and market conditions. You’ll need a sharp picture of where your business is today. It doesn’t benefit you to misrepresent the data that goes into creating your valuation. Start with truth, and you’ll be better equipped to improve your business with every decision you make. Then, as you grow and improve under our program, you’ll revisit the valuation and reassess. This is essential to business planning.
Base decisions on your own data and situation. If your competitor or a neighboring business sold for a certain price, it doesn’t necessarily apply to your situation. Selling or exiting from a business is not like selling a house. There are many elements that affect the total package, including terms, equipment, real estate, assets, attractive inducements, the role of working family members and their compensation, and your role after the sale. Your business decision-making must reflect all the factors that affect the sale.
Get a baseline valuation to start. There’s no reason to overpay for a valuation at this stage. This is the thing about how to get a valuation: It should be done by an expert who understands our industry and the current multiples for your sector and situation. It should NOT be someone who has a vested interest in overestimating or under-reporting the results. My experienced team and our trusted providers can help you with the valuation step in the sale of your business.
Leverage your report. In addition to that big “how much” number that every owner is curious about, your business advisor should go over all the sections of the valuation with you so you can make the most of the information in the report. You’ll find your valuation is a valuable working document that can help you as you move toward your goals.
Use your valuation to craft a road map. Your valuation should give you a deeper understanding of your strengths, weaknesses, opportunities, and strengths (SWOT). With your advisor, you should analyze and work on the factors that positively and negatively affect the business.
Take action. If there is a gap in what you thought the business is worth and what the valuation says, the time to address that is while the information is fresh. Don’t just throw the report in a drawer and pray that the next one will be more in line with your hopes.
Your five-year horizon to sell or exit from your business requires planning. You must base your plan on accurate information and an overall picture of what your business is worth now so you can develop a road map. Don’t guess, hope, pray or wonder. Start with a valuation from a qualified and experienced industry advisor such as LaManna Consulting Group so you can build your five-year exit plan with confidence.
How many years do you have until you sell or exit from your business? Do you have a solid plan? Is everyone on your team pulling in the same direction to help you reach your goals? I’ve been a professional advisor for 20+ years, helping owners make better decisions about the future. Your success starts with a trustworthy expert with years of experience and proven results in our industry. Contact me for a confidential discussion about your situation and timeline.