Why Should You Have a Business Valuation Done?

Having an up-to-date business valuation can be critical at certain times

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Every business owner considers having a business valuation done when he decides to sell the business, but you should actually have an up-to-date business valuation on hand at all times. Ideally, you'll have one done at least once a year to guard against numerous possibilities. 

Something Could Happen to You 

If something calamitous were to happen to the business owner, it would mean a major change in the business. What would happen if you died or became incapacitated? Having a current business valuation on hand can help your family deal with the potential sale or dissolution of your business.

An Opportunity to Sell or Merge

You might come upon an opportunity to sell or merge with another company and the matter must be decided quickly. Having an up to date business valuation allows you to take advantage of these kinds of opportunities. If you're unable to provide one and must arrange to have one completed, the offer could be off the table by the time this is accomplished. 

Addition of a New Owner

You might want to take on a new partner or LLC member, and you'll need to know the value of your business to determine the buy-in price. Moreover, she'll probably want the valuation to determine if the buy-in price is reasonable. 

Contemplating an Exit Strategy

You might be reaching retirement age and you're contemplating an exit strategy. You'll need to know the value of your business so you can construct a plan. An exit strategy doesn't necessarily have to mean the sale or closing of a business. It could mean a restructuring. In any case, a valuation can help determine the strategy.

Expanding the Business

You might want to expand or build new facilities. You can be sure that the bank will want a valuation of your business if you'll be looking for financing. Taking your business valuation to the bank can help streamline things and make the bank's decision to lend money a easier. There won't be a delay as you—or the bank—has one completed. 

Exit of Partners or Shareholders

If you encounter the need to separate from partners or shareholders, you'll need to know the value of the business to determine how to divide it up. Having this information on hand can make an unpleasant situation less stressful.

A Disaster Situation 

It's very useful to have a previous business valuation on hand after a business disaster. It can establish a benchmark against which to compare the value of the business before and after the event occurred. You can't easily go back in time to value your business as of a previous date, at least not with utmost accuracy. 

Divorce or Other Family Issues

Life happens and things change, and there are many reasons why having an up-to-date business valuation can help you plan and deal with personal emergencies and unpleasant events. If you're dealing with a divorce, the court will almost certainly want to establish the value of your business as an asset of the marriage. In this case, however, the judge will probably appoint a neutral third party to conduct the valuation.

You might be able to avoid court entirely if you know the value of your business as you and your spouse begin discussions and negotiations to settle matters on your own.  

How to Get a Business Valuation

Where do you start? Begin by finding a qualified business appraiser. The appraiser should be experienced with businesses and not residential-type valuations.