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Do you know what your business is worth?

By: TRistaino, 8/02/12

Several years ago I attended a conference conducted by Inc. magazine. One of the seminars at that conference was how to determine what your business was worth. The instructor asked how many people in the room knew what their business was worth. Two people out of the twenty-five in the room raised their hand. The instructor noted this was not unusual and encouraged the rest of us to get busy determing what our business was worth.

All of us ( or our heirs or estate ) at some point in time will be faced with determining the value of our business. We will sell to an outside investor, a competitor, an employee, or a family member. We can always liquidate the assets of the business but what fun is that? If we don’t know what the value of our business is then we are confronted with asking the potenial buyer to set the value. The dialog goes something like this: ” How much do you want for the business?” ” I don’t know.Make me an offer.” Assume the investor makes an offer. Now what? Is it high?( Not likely.) Low? Is it what we expected? We wouldn’t sell our personal residence without getting an appraisal. Why would we sell our business without getting one?

Before we get sick, or divorced,or decide we don’t want to own a business anymore let’s find out what we have to sell. A CPA in concert with an attorney can provide a range of values for our business as well as give advice on how to structure the deal to minimize tax consequences. Once this is accomplished we may be surprised at how much or how little our treasured business is worth. If the appraisal is low then we have time to fix and improve our operation to enhance its value. Now when discussing the sale with a potential buyer and they ask ” How much do you want for the business?” We can reply ” The business is worth $ xxxxx. ” If negotiations continue you will be able to use your team of advisors to structure the best deal for you .

Every business is worth something. Aren’t you curious as to how much yours is worth? What are you waiting for?