Why Is It Important to Understand the Value of Your Business?

The Worst Mistakes Business Owners Make When Selling
December 15, 2018
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Regardless of the size of your business, you are likely very familiar with your bottom line. You know if your business is making money. You know that you paid for your equipment and building. You know what your inventory costs. But do you really know the value of your business?

The value of your business is something that is not so easily defined. There are a lot of factors that go into determining the value of your business, including the local economy and depreciation values. There are several reasons you may need to know the value of your business, and it is best to be prepared in advance for any situation.

Events in Business

If you have a partner, want to get a partner, or want to increase shareholders, you will need to know the value of your business and the value of the shares. Another common reason to need to know the value of your business is when you need additional funding. You may want to get a small business loan to expand your operation or meet operating costs in a down year. Lenders will want to see hard evidence of the value of your business.

Events in Personal Life

You may also have personal life events that could result in the sale of your business. Health problems could arise, causing you to sell the business and go into early retirement. Your spouse could file for divorce, in which case the courts will expect you to know the value of your business as an asset. Family problems could incite a move in which you cannot take the business with you. Any of these events could come up unexpectedly, and it is best to be fully prepared for them when they arise.