10 Reasons You Should Know the Value of Your Company

Posted by on Friday, February 19th, 2016 in Uncategorized

10 Reasons You Should Know the Value of Your Company

Decision making. That’s what business is about. From the time you get your inspiration, through planning, getting your first clients, through growth, up to the time you decide to exit, you will have to make tons of decisions. These decisions will be made necessary by the ever-fluid economic atmosphere; the constantly evolving competitor tactics and customer demands; and the always-changing regulatory landscape.

 

Most of the times you make such decisions, your company’s value, by utmost necessity, will be brought into the equation. You need to have the market value of your company at your fingertips if you are to make informed and profitable decisions.

 

Here are ten more reasons why you should conduct a company valuation at every turn.

 

 

1. To Execute the Most Suitable Exit Strategy

For you to successfully execute an exit strategy, company valuation is a must. Whether you intend to sell the company, use an IPO, or exit through a merger, it is necessary for you to know how much your company is worth. Different exit methods come with different costs. Knowing how much your business is worth will enable you to choose the exit strategy that brings you the most returns when the transfer of ownership if fully done.

 

 

2. For Estate Planning

Death is inevitable, but chaos and tax burdens on an estate after one’s death can be managed, or avoided through estate planning. An estate plan is a guideline as to how your assets should be managed in case of your passing on or incapacitation. This is an ongoing process and knowing the value of your company at every turn enables you to accurately update your plan.

 

 

3. To Best Handle Shareholder and Partner Disputes

Disputes are not rare among shareholders and partners in a company. Knowing the value of your company makes solving these disputes easier and fairer. Some definitely end in splits and having the company’s value at your fingertips simplifies the process.

 

 

4. In Case of Marital Disputes

While the thought of a husband and wife fighting over business assets is really an uncomfortable one, the fact is that it does happen. When it does, a reliable company valuation will be necessary to settle the wrangle over marital business assets.

 

 

5. To Establish Your Finish Line

Measuring how far you are from your business goals calls for an accurate determination of your company’s value. A business valuation will tell you how much harder -or smarter- you should work to reach your set-out finish line.

 

 

6. To Better Handle Tax Matters

In business, tax issues are an ever constant companion. There will be a tax complication to be sorted out at every turn. Some of these may need the value of your company to be known for them to be sorted out.

 

 

7. To Know Where to Direct Your Efforts

Without knowing what is giving you how much in returns, you could be focusing your energy in the wrong direction. Having the value of your company after each major turn shows you which direction is the most profitable.

 

 

8. To Best Direct Your Incentives

One of the best ways to motivate employees towards achieving a common company goal is by offering them incentives. But you cannot just give incentives for just anything. You have to select the most value adding areas of business you can focus on. Knowing the value of your company shows you which areas you should direct your incentives for maximum overall returns.

 

 

9. To Better Understand Your Borrowing Power

Borrowing is almost inescapable when running a company. You will find yourself in positions that demand your borrowing if you are to survive or simply grow. For this, your company’s value will inevitably be brought into question. You have to know what each asset is worth and how can be borrowed against it.

 

 

 10. To Set the Right Goals

Every business should have goals- both long and short term. These have to be specific and should be tied to a timeframe. If you do not know the value of your business, you can easily make unrealistic goals, or even aim lower than you can actually accomplish. Having the value of your company in your knowledge is like knowing the starting point to help you determine just how much is achievable with respect to where you are currently in terms of value.

 

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