We talk a lot about the ins and outs of business valuation and thought it might be helpful to take a step back to share three quick, but important, reminders you can share with your clients related to why a reliable business valuation is important in the first place.

1. Accurate planning input – How many times have you reached the point in financial planning when you ask your business owning clients for the value of their business and they either ask you what it needs to be to help them retire, they plug in a multiple, or give you a number based on what a business down the street recently sold for? Just like someone would never go 20 years guessing about their 401(k) balance, it is dangerous for a business owner or advisor to guess on the value of the business. Most often, an owner’s successful retirement plan pivots on getting the value of the business right. That is because the business is their most significant asset and the entire plan pivots on the expectation of the value that will be achieved.

2. Actionable Levers – The valuation process will help your clients understand the quantitative and qualitative levers they have to increase value while there is still time before they want to — or have to — sell. Using a multiple of EBITDA, or other earnings figure alone, cannot uncover the actionable insights about what is going on inside their business. Nor does it provide a meaningful conclusion of value.

3. Always be ready – You never know when the right buyer may come along! Or, while less enjoyable to think about, we do see situations where people are forced to sell quickly because of a change in health or other unfortunate personal situations. Having a business valuation updated regularly helps your business clients stay aware of their own business trends, stay well prepared for any opportunities or issues that may arise, and know whether their business investment is increasing or decreasing in value. Any wise investor is always preparing for their exit strategy—no matter their age or expected ownership horizon.

The bottom line is that having accurate valuation information aids in making informed business decisions – both short term and long term – and provides realistic data for personal retirement planning. With the introduction of our on-demand Business Trend Analysis + Valuation (BTA+V) online valuation tool you have more choices than ever to find the right valuation process based on your client’s budget and needs. We are happy to help you understand and evaluate the options. Want an early look at the BTA+V tool?  Give us a call at 608-257-2757 or email me at the address below if you’d like to set up a 30-minute demo!