Business Valuation Blog | Understanding Buying / Selling a Company

How to Use Business Valuations in Strategic Planning to Succeed

Posted by Business Valuation Specialists LLC on May 4, 2016 10:00:00 AM


To really be successful in business, you need to use strategic planning. But how can you figure out which areas to focus on? Do you know where your business is strong and where it is weak? Smart entrepreneurs and managers know that to create a successful business strategy, you need to know all the facts about the business. One of the easier ways to accomplish this is by having a company valuation performed. The valuation of a company provides you with important insights so you can create a business strategy that builds on your strengths and addresses your weaknesses. Here's how:

How to Use Business Valuations in Strategic Planning to Succeed

A Detailed Company View

How does your company compare to others in the industry? When you run a business on a daily basis, it can be hard to see the forest for the trees. A company appraisal gives you an outsider's view of your business performance. This insight allows you to gain knowledge of which processes are working in which areas and which processes need some serious overhauls to remain successful.

Helps Prevent Unnecessary Risk

Another area where a company valuation creates detailed insight is in risk management. If you made a business decision a few years ago that was wildly successful, how do you know that the same strategy would work today? Has the market changed? Have your competitors added features that leave your products or services in the dust? By knowing how your company stacks up against others, you can ensure that you're not taking a serious risk to your business in the process.

Allows You to Make Informed Decisions

When you have an up to date business valuation, you're able to make better business decisions based on solid facts. Why? Businesses are often perceived by those on the inside as being more or less productive and successful than an independent party, such as a business valuation specialist. You may be basing your business value on the simple value of the assets, which doesn't take into account business income projections. You could be figuring the valuation of your business on a recent sale of a similar business in your area, while your company has a less productive location or significant differences. These can lead to hesitation in planning or overconfidence in your business' value.

An Accurate Statement of Business Value

Business owner's often throw around multiples that they hear at the golf club that their buddy's business sold for.  His business sold for 10x so mine should be worth that as well.  Was that 10x revenue? 10x net income? 10x EBITDA? 10x Seller's Discretionary Earnings?  You could be comparing apples and oranges and in the process shoot yourself in the foot when you turn down what is later found out to be an above market offer for your business.

When you use strategic planning, your business will do well, but by using business appraisals as part of the process, you can make informed decisions that benefit your company greatly. If you're ready to start planning your business strategy, it's important to have a business appraisal performed as part of the process. If you're not currently working with a certified business appraiser, please feel to contact us today to be connected with one of our experienced, certified business valuation specialists.