The Importance of Knowing How Much Your Small Business Is Worth

Business valuation tools

When many small business owners are in a position where they have to find our how much their company is worth. many people balk. They worry that the economic exercise is going to be difficult. Despite there being a plethora of small business valuation resources available, it is a daunting task to complete the small business valuation process.

Entrepreneurandnbsp;has looked at the importance of small business valuations. It is estimated that about 98% of all small business owners have never gone through the process of finding out the value of their companies. This is from the “Business Valuation Firms in the U.S.” from the 2014 IBISWorld report. This speaks volumes to the difficulty of finding out just how much a company is worth. The companies that have taken the leap of faith and went all in to learn this value are mostly the larger businesses who have more resources at their disposal to deal with the question, “what is my business worth?”

There are a few things that make the process of doing a small business valuation hard to do. First of all, it is not a cheap endeavor. Secondly, it can take a lot of valuable time. This is one of the reasons there are a lot of small business valuation resources available to help with the process. Michael Carter, Daniel Priestly and Scott Gabehart recently released the book, “What’s Your Business Worth?: The Entrepreneur and Advisor’s Guide to Discovering, Monitoring, and Optimizing Business Valuation.” During the process of producing the book, the trio found that doing offline valuations can often cost up to $8,000. They can also take between four and six weeks to complete. Oftentimes, small business owners just do not think this a good use of their money and time. They think that the process takes too much away from running their companies.

One of the problems that comes up when a small business owner neglects to use the small business valuation resources that are available is that they can miss out on a lot of opportunities. A small business valuation gives them very valuable insights into the different areas of their business. They may not have the right capitol structure in place but they can change it. This can also show them what kind of insurance they should have. This can lead to the loss of a lot of profit. This is for many businesses that simply cannot afford it. Babson College put out the 2013 Global Entrepreneurship Monitor Report. Many businesses in the U.S. lost out on many financing opportunities because they had no idea the real value of their company.

The process of maintaining a current understanding of the value of the business is helpful for owners to make the right decisions for themselves. Learning when they should raise capital, the best way to ask for that capital or for a loan from investors can make a big difference. As painful as it may be, using small business valuation resources to discover the real worth of the business can let them know when the time to close the doors has come. By not knowing the real value of a company, they can leave literally millions of dollars on the table.

They say that, “knowledge is power” and this is really never more true than when you are dealing with small business valuations. This gives owners the resources to do what they need to do to reach their potential and best their competition.

The good news about doing business in today’s environment is that there are really so many more small business valuation resources available to make the process of discovering the true value of a company much more easy, take much less time and be a lot less costly. That makes it nearly impossible to find a good reason to shy away from the small business valuation process.

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