Business Valuation: The first step in your exit planning process
If you’ve begun to seriously think about retirement or selling your business for other reasons, you need to start thinking about exit planning strategies. You must have an exit plan in order to make selling your business as easy as possible. To avoid a rough transition, start with a valuation, followed by topics like Distance to Goal, Prospective Buyers and a Professional Team.
Before you begin to expand your business, retire, or even add a new product line, you need to know how much your business is worth. Value is the key to any transition planning for your business. Knowing the real value of your business isn’t the same as thinking, “Well that guy at my networking meeting said most copy/printing companies are selling for X so that’s probably what my copy/printing company will sell for.”
A business valuation will focus on the value of YOUR specific business, including cash flow, and profitability, yes, but also customers, employees, the systems you have in place and marketability of the business itself.
A valuation professional will ask for some of or all of the following documents: financial statements, tax returns, lists of customers and vendors, etc. They may also look to your business’s industry and the economic environment in your city or region.
While it may seem like a daunting process, knowing the worth of YOUR business, not just the average sales price of businesses like yours, will be a great first step, whether you decide to sell , refinance, or simply hang on to that information for future use.