Most business owners don’t think twice about going to the doctor once a year for a physical. So why don’t they treat their company with the same care and attention? The truth is that many executives haven’t done a “physical” on their companies in decades. They only stop to really look at their business for tax purposes or when something has gone wrong.
Think about a yearly valuation updates
Let’s take a look at a few of the reasons why business owners should get an annual valuation. The first issue is about how life often throws us curveballs. Any time, something unexpected could happen to you or your business, like a problem with a business partner or a change in your personal life, perhaps a divorce or even the loss of a key employee or client. When you keep a close eye on how much your business is worth, you can predict how changes might affect you. You will also learn about the health of your business, which may be even more important and aids in planning as well as risk mitigation.
Watch how your business grows
It is very important to know how your business is doing from one year to the next. Is enterprise value really going up? If not, you would want to know right away so you can start making adjustments. If a big problem came up, you would want to know about it right away so you could do something about it. If not, you might just let the years go by while this problem gets worse. When you commit to regular valuations, you’ll get information like this. Some refer to planning like this as working “on” the business – rather than working “in” the business.
Get ready for what you don’t know
You may not feel ready to sell. But you should always be ready in case the situation comes up. What if a great chance came knocking on your door? On the other hand, what if something like an illness put you in a situation where you had to sell something quickly? If you’re not emotionally prepared and you don’t have your business affairs in order, you might miss out on a good chance.
A well-known accounting firm’s numbers show that 65% of business owners don’t know how much their business is worth. But at the same time, on average 75% of these business owners’ net worth is tied up in their business! It’s easy to see what’s wrong with these numbers. Make sure to take care of your business as well as you take care of yourself. The best way to do that is to regularly work “on” the business so that it stays on a healthy course and can be prepared for sale quickly if circumstances require.