What is My Business Worth?

If you’re a small business owner, you’ve likely spent years and much of your own money building your business, but do you know what that business is now worth?  It is an important question for a number of reasons: 

·         When it’s time to sell, you’ll naturally need the businesses value
·         Owners often need this information when obtaining financing through a bank
·         Gift or estate tax valuations
·         Buy/sell agreements
·         Personal Financial Statements
·         Divorce proceedings
·         Charitable contributions
·         To defend FMV if the IRS were to ever examine a sale or acquisition

Over the next few blogs, we’ll look at a few basics of business valuations.  Today, let’s look at a few of those basics.  When a valuation is performed, it is based on a specific point in time and can be accomplished via a number of methods.  The value can even  be more than one number.  Any valuation is based upon judgments and estimates; the ultimate value of a business is based on each person’s assessment of benefits, risks, and future returns.  At the end of the day, a business is valued at the present worth of the future benefits of ownership:  a willing buyer and a willing seller. 

The general methods of valuation include the Income Approach, the Market Approach, an Asset-based Approach, Excess Earnings Approach, but there are other models as well.  Within each of these approaches there are sub-groups and multiple estimates to make.  Again, it is important to note that there are multiple decisions to make by the individual carrying out the valuation. 

In our next blog, we’ll look further into these methods and which one might be right for you.  In the meantime, if you feel you need these type of services, please contact our Firm to discuss further.

brad@mcarthurco.com

704.544.8429