Executives will likely examine their own investments at least once a year, if not more often. However, these same capable executives never consider giving their company an annual exam unless required to do so by rule or regulations.
Most Business Owners Don’t Know
According to a recent study made by a leading CPA firm, 65% of business owners don’t know the value of their company. 75% of the surveyed business owners had their net worth tied up in their businesses. The most noticeable of all was the fact that 85% of business owners have no exit strategy whatsoever.
Having Recurrent Valuations is a Must
Business owners should know what their businesses are worth on an annual basis. Situations can change very rapidly, both personally as well as economically. A failure to have a valuation leaves one exposed if issues suddenly arise such as estate planning, divorce or even partnership issues.
It is also important to understand how your business compares to last year and previous years. A valuation is a great tool to have when comparing your business to other businesses. The most important reason to have an annual valuation is because it can help you spot and fix problems.
“Buy, Sell or Get Out of the Way”
If you don’t know your valuation, then you don’t know where you are headed. As former Chrysler CEO, Lee Iacocca once stated, “Buy, sell or get out of the way.”
You need to know your valuation in order to take full advantage of opportunities. Standing still isn’t an option. Even if you feel that an acquisition isn’t the right move at the moment, having a current valuation means you’re ready to go if opportunity does knock!
Don’t miss out on an opportunity because you didn’t have a valuation in place. You never know when a potential buyer may enter the picture. Often hot offers and hot opportunities depend on speed. The time it takes to get a valuation could mean that the opportunity is no longer available. Whether you choose to exercise it or not, an annual valuation of your business provides a valuable decision-making tool.