Often, business owners don’t know the true value of their company. This of course can solve problems such as the owner under appreciating the worth of his or her company or, worse, failing to sell it for more than its worth.
This is why it is very important to look up business valuation resources. This is so that when the time comes you know how much your business is really worth. Plus, you want to have this valuation done before it becomes necessary to have the results. Here are 8 scenarios when that might occur.
- A Death in the Upper Branch
What would happen if the owner or a shareholder were to die? Those who are left may be left to pickup the business after this tragic passing away. If the family were to have that business valuation they could have one more tool added to aid them as they deal with a sale, dissolution, or transition of power. - Exchanges of Stock
What if you want to give stock? How would you know how much to give? Would you be able to accurately tell those looking to obtain the stock how much it is worth if you don’t even know how much the company is worth? With that in mind, it’s best to look into how to value a company now. - Equity Compensation
Knowing how much the business works also benefits the employees working under you. If you know the value of your business you can also allow more room for equity compensation where employees can share in the profits via appreciation. This also boosts morale and retention. - Converting from a C-corp to a S-corp
- Assets
Another reason for why you must look into business valuation resources is that you must know how to properly handle the allocation of intangible assets. If you know the real numbers behind your corporation you will know who and where to turn over all of your intangible assets. - Considering An Exit
What if it’s time to get out of the company or business. This could be for several reasons. Maybe its for family related reasons such as a divorce. Maybe it’s because you see an oncoming dilemma or business disaster. Whatever it may be, if you know that you want to get out, knowing the cost of doing so and the loss of value you and the business will have is a great help in making that change. - Solving Shareholder Disputes
Perhaps you are getting divorced but you don’t want to leave the business. This is a perfect situation when researching business valuation resources is essential. If you and your ex-spouse want to figure out how to split the shares of the business it’s best to know how much that business is worth. The same could be said for any kind of dispute between shareholders and not just ones that involved divorcees. - A Charitable Contribution
It’s also important to know the value of your business for when you are transitioning from a c-corporation to a s-corporation. This is for multiple reasons. One being that you must be able to properly express these numbers when taxing as a c-corp.
Lastly, it’s always important to give back. If you have made it big with your company you may be considering contributing a donation to a charity or two (or hopefully more). If so, it would be good to know how much you and your business can contribute. Knowing the value of said business then is a necessary step in that process. Just as with the equity compensation earlier, knowing your business’s value can not only help you, but help others out in the long run.
Getting a business valuation appraisal means that you are taking the next step towards properly managing your business. If you want your company and business to grow you need to first know what it’s growing from. You have to ask “What is my business worth,” and then working from there. Looking up business valuation resources may seem like a hassle or daunting now, but once it’s done you’ll feel better for it. Once that process is over, you’ll have a better idea of the big picture that is your business. From there, there’s many ways to obtain even greater success.
