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Business valuation: A critical piece of a business owner’s financial puzzle

Posted 2 months ago in Small business by Guest
Posted by Guest

#XeroHour is a series of educational events where you can grow your local network of Xero accounting partners, collaborate and take advantage of Xero-focused education and discussions — making it the perfect place to meet for business. Our next #XeroHour features an update from BizEquity. We’re talking about what your business is worth, and why it’s important to know.

There are a few jokes that only accountants will love, like “It’s accrual world” …

Like most jokes, there’s usually some truth to it, especially with this one. It’s estimated that roughly 90 percent of business owners do not know the value of their biggest asset, their business.

Most business owners delay company valuations until there is an external event: they are ready to sell (exit) or they are going through a difficult situation, like divorce or separation from a partner. Other reasons include: expense, complexity, time constraints, desire for privacy, and just a general lack of confidence.

These reasons, however, overlook the opportunities that a current valuation affords like maximizing tax benefits, increasing insurance protection, estate planning, succession planning, and continued business growth opportunities.

Getting a business valuation

But technological innovations can address these issues. BizEquity can leverage data through its integration with Xero to produce a detailed report with a click of a button. These insights compare their business with benchmarked data, market comps and multiples specific to their industry. Technology eliminates the traditional timeframes of four to six weeks, to minutes and reduces costs dramatically. A current business valuation becomes a cost-effective tool to drive a small business’s ROI, rather than a non-recoverable fee.

Amazon’s top selling book on business valuation, What’s Your Business Worth? makes a case for conducting an annual valuation so business owners have a clear explanation of the value of their business and the evidence to support the result. A valuation offers insights to help a business owner see where to refocus or change course. The data can guide strategic decisions, business development plans, and even assess whether the right people are in place to support long-term goals.

Business owners face enough challenges that arise from a lack of actionable insights. But now, it’s easy to take curiosity about business valuation off that list.

Find a Xero Hour near you.

 

This article was written by Chris Morrison from BizEquity.

One comment

Annika Larson
February 22, 2017 at 12.20 pm

While I am not a business owner, I have always been interested in business and finance and how valuations work. As you said, most people wait until they have a definitive need for a business valuation such as selling or divorce. There are really so many benefits that can come from a current valuation. I hadn’t thought of how it can help increase insurance protection, but that could make a big difference. I will have to be sure to look more into business valuation! http://integgra.com/home.html

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