Business Valuation Blog | Understanding Buying / Selling a Company

How to Use a Business Valuation for Exit Planning Purposes

Posted by Business Valuation Specialists LLC on Dec 15, 2016 8:41:21 AM

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When you're working on an exit strategy for your business, you've got a lot of different options to consider. But one area where you can discover real value is through a business valuation for exit planning purposes. By determining the valuation of a company, you can figure out exactly where you need to improve your business before putting it up for sale or passing it on to the next generation. Here are some details on how you can use business appraisals to plan a comprehensive exit strategy.

How to Use a Business Valuation for Exit Planning Purposes

A business valuation is a financial document that provides solid evidence of your business' value. It can provide significant insights you may not have considered into your position in the market, your daily operations, your balance sheet and a number of other aspects. By having this information in hand prior to completing exit planning, you can determine whether it is worthwhile to make particular improvements to your business to maximize profits from the sale of your business.

One of the first areas of scrutiny that many prospective buyers will look at will be your business' financial statements. But what if you've had the occasional irregular income or expense? A qualified business valuation specialist is able to put your paperwork through adjustments in a process known as normalizing.This provides prospective buyers with a much more accurate view of your business' financial picture. Beyond the financial statements, a good business valuation specialist can provide advice on whether you should pay down particular debts, get legal documentation in order or reduce overhead expenses. This can make your business more flexible as it goes into the exit process.

But what about your assets otherwise? If your accountant uses a standardized depreciation table for tax purposes, they're using a completely legal way to depreciate your assets. But if those assets are still in use by your business and have been completely depreciated, they still have value that is not being counted as assets. If you have assets that are being used hard and must be replaced before they are completely depreciated, you may still have them recorded as assets even though they have no value. A good business valuation specialist can help make sure your balance sheet reflects accurate values by recommending things such as an equipment appraisal.

But what about outside influences that can affect your business' appraised value? An experienced business appraiser may have a better feel for where the market is going and whether it is a good time to sell or if you should plan on waiting out a slump in the market to get the best possible value for your business. Do you have a new competitor in the region or in your particular specialty? A good business valuation specialist may be able to give you advice on how to further specialize or develop your unique selling point to make your business more attractive to a prospective buyer. 

By getting a business valuation for exit planning purposes, you can create a comprehensive exit strategy that provides you the opportunity to get the most from your business. If you're not currently working with a certified business valuations specialist who has experienced in your industry, please feel free to contact us today. We'd be happy to connect you with one of our experienced business appraisal specialists.

Topics: exit planning, family business, selling a business