Eddy N. Kemp

(808) 239-9300

Ethan A. Lee

(808) 687-0309

Benefits of a Business Valuation

As discussed in a previous post titled “Why Do I Need a Business Valuation?,” an independent business valuation can be needed for many reasons. This post mentions a few benefits of having a professional valuation performed:

  • Exit planning – Your business is likely a big part of your overall investment portfolio. That portfolio might also include cash, stocks/bonds/mutual funds, and real estate investments. You can quickly find out what these investments are worth by logging in to an online account or meeting with a real estate professional. Unfortunately, the value of your privately-held business is not as readily available. However, it is critical to know the value of your business early in the exit planning process. A business valuation can help you quantify your financial resources and determine if the current value of your business is sufficient to support your retirement.
  • Maximize value – An independent business valuation can help you know what your business is worth today, identify ways to improve value, and thereby enable you to take any necessary steps to maximize the value of your business between now and the time you decide to sell.
  • Manage wealth – Your business could be a significant part of your overall wealth. A knowledgeable valuation professional can help you identify strategies that can be employed to enhance returns to owners prior to an exit event.
  • Credibility – If you are looking to finance the expansion or acquisition of a business, having an independent valuation of the business can strengthen credibility and provide lenders with important information. Some business loans, such as Small Business Administration loans, require a qualified independent appraisal.
  • Protect your family – Having a regular valuation of your business can help preserve wealth and reduce the burden on your family if anything tragic were to happen to you. For example, an annual valuation can provide the basis for a buy-out of your ownership interest if you are not the only owner of the business. Additionally, a valuation is often required for estate tax purposes.
  • Retain key employees – A professional valuation can allow you to show key employees how their efforts are impacting the value of the business. As employees begin to understand how they can benefit from building the value of the business, they will be more likely to feel a sense of ownership and desire to stay with the company for the long-term. Annual valuations are required in the case of Employee Stock Ownership Plans (ESOPs), but they can provide all privately-held businesses a unique motivational tool to retain key employees.

A professional valuation can help your business prosper now, facilitate planning for the future, and enable maximum wealth preservation.

The Valuation Process