You have worked day and night, investing money, time, and effort into your business, but if you wanted to sell it today, how much would your asking price be? Did you know that 98% of business owners don’t know the value of their company?

A business valuation allows you to have an asking price in mind when you are ready to sell your business. However, it is not the only use for a business valuation; it can also be used if you want to approach potential investors, plan strategically for growth, or if one of the founders wants to leave the company. It is important to highlight that the worth of your business might not be the figure you had in mind. I often see clients come to me for help conducting a business valuation, and once I submit the valuation report, they realise that they had a higher price in mind. This discrepancy may arise from various internal issues. You should be prepared for this exercise.

 What do we do in this case? We work together to identify areas for improvement and implement actions that would increase the value of the business. A business valuation can be conducted 3-5 years before your exit strategy to ensure that your business is on the right track. It is important to mention that before putting a business on the market, we need to prepare it by taking the right steps. Selling a business involves three phases: the pre-sale phase, the sale phase, and the after-sale phase. A business needs to be ready for all three phases before it is put on the market for sale. Like you planned for the launch of your business and the growth of your business, you should plan for its exit, as well.

The next step is how to conduct a business valuation. Conducting a valuation for your own business can be challenging, overwhelming, and complex. I recommend hiring a professional expert for this exercise. The reason is that a professional will be able to identify objectively what issues can affect the valuation of the business, as well as the right methods. As mentioned above, a business valuation will be performed using different methods, and an expert will determine the right methods based on various criteria such as the size of the company, its industry, and its financial situation.

Once a business valuation is conducted, the owner can decide if it is the right time to sell. It is also important to note that a business valuation is an effective way to establish an asking price that neither overvalues nor undervalues the business. An overvalued business will face difficulties in finding a buyer, while an undervalued business risks leaving money on the table. Often, businesses are overvalued, and potential buyers can see this during their due diligence. It’s also crucial to mention that potential buyers will conduct their due diligence before starting negotiations; therefore, the business needs to be ready. This readiness sends a positive signal to potential buyers, demonstrating that your company is organised and professional.

There are many reasons to conduct a business valuation for your company. It is essential if you want to sell your business or seek potential investors. This exercise offers numerous benefits, such as obtaining a fair value for your business, ensuring everything is in order before approaching potential buyers or investors, and identifying ways to maximise its value if necessary.

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