Most owners of a business are guessing at its value to an outside buyer. They may have an idea or can guess at it, or more specifically, they know what they want for the sale of their business. Unfortunately, very often, what they want does not relate to what the business is worth.
Owners should have a valuation of their business completed every three to four years—more often if they are contemplating a sale in the near term. The valuation should be performed by an outside industry expert, one who is familiar with market trends and values. By having a valuation done, the owner can now get a feel for the value of their business and whether it meets their needs. Among other things, valuations take into account current market conditions, industry specific methodologies and industry trends. These items are dynamic and usually in a state of flux, but the valuation can give a sense of a range one could expect if a sale was to occur and whether that value would meet their needs.
If the valuation is less than what the owner wants or needs, then steps can be taken to help increase the value. The outside professional can guide you through areas that might need improving so that you can realize your expectations. The owner needs to be a realistic seller.
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