Why Valuing Your Business Today Is an Important First Step in Succession Planning

Many business owners have an idea of what their business is worth but they aren’t exactly sure what the number is or how to quantify it. Commonly, many business owners overestimate the value of their business, based on perceived values, rough estimation techniques usually derived from comparing what similar businesses have sold for at market, or simple gut feeling. One thing is clear: Failing to know what your business is worth right now can have negative consequences for how you plan the succession or exit strategy of your business and the value you realize at sale.

Consider this, underestimating what the most probable selling price of your business is today may lead you to focus your attention away from underlying issues affecting value that may not come to light until the sale transaction is well underway and due diligence is being performed. Buyers will see this negative information as an opportunity to reduce their offer or worse, walk away from the deal completely as the real or perceived risk may now be too high. It would be an extremely frustrating realization to know that you could have addressed the issues prior to sale, corrected them, mitigated the risk, and realized a higher sale price.

  • Obtain a valuation of your business to determine the most probable selling price if it went to market today
  • Make a plan to address the issues that are affecting the current value and rely on your trusted advisors for guidance and assistance
  • Be realistic – give yourself enough time to focus on implementing changes without feeling overly pressured to get it done
  • Avoid burnout and frustration by accepting that change may take longer than expected

Succession planning is about creating a strategy to maximize return at time of sale, not just accept the best or only offer. If you are considering selling your business now or in the future, and would like to understand what the most probable selling price of your business is today and how to realize the maximum value at time of sale, contact Ken North from Pacific M&A and Business Brokers Ltd., where Knowledge, Experience, and Trust all come together.