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  • Writer's pictureMark W. Boslett

Why You Should Get A Preliminary Valuation Of Your Company

One of the elements of a successful Exit Plan is to know what your company is worth. The best way to accomplish this is to contact a certified valuation analyst to get a business valuation.

Any Exit Plan should be owner-based with a foundation of your goals, one of which should be how much money you want to have when you leave your business.

You’ll want to minimize or eliminate any weakness to make your company more valuable to potential buyers. Preliminary valuations can help identify weaknesses, as well as design incentive plans for key employees. Stock Purchase, Stock Bonus and Non-Qualified Deferred Compensation Plans are all used to motivate employees to help increase the value of your company. Once the current value of your business is obtained, these plans can be used to motivate key employees to increase that value to the level that you require to exit successfully, no matter when you intend to exit your business.

If you are considering a transfer to insiders (key employees, co-owners, and family members) you should begin to transfer ownership before your planned exit from the business. This will help you receive more money, while paying less tax, and these initial transfers are usually made at a discount. The Internal Revenue Service will want to review any transaction that involves them getting less so it is essential that you obtain a complete business valuation.

No matter who you intend to sell your business to, an independent valuation provides a solid basis to start your Exit Plan.

The valuation process involves two distinct steps: a preliminary valuation and a complete valuation. The preliminary valuation typically costs about 60% of the total valuation fee, is the basis for the complete valuation, and lacks the formal written report.

You may not even want to begin an expensive sale process if your business isn’t worth the amount you need to live on for the rest of your life, so getting your business valued before you begin is important. You wouldn’t put your house on the market before getting an appraisal and chances are it’s not nearly as valuable as your business. For all these reasons make sure you get a reliable value for your business from a credible company.

We are certainly glad to help. Contact us for a free evaluation today.

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