Frequently Asked Questions
Back to FAQ'sWhy are Business Valuations so important?
A professional valuation analysis of the business is paramount whether planning the sale or purchase of a business, developing estate or tax planning strategies, considering a spin-off or management buyout - and is usually the foundation to any type of business transaction.
Even if you are not ready to sell your business, a Business Valuation every two or three years can help you grow your business. How? A Certified Valuation is an important value measurement tool. If the value of your business has not increased from time to time, what are you expecting when you sell the business?
There are other reasons why a business owner might require a valuation. Marital problems, partnership issues, estate planning, and exit strategies are just a few. A professional valuation prepared by a Certified Valuator can go a long way if litigation becomes necessary.
The following are the top reasons that companies benefit from having a business valuation.
1. Know what your company is worth. Many business owners have no idea what their business is worth; and if they think they know, they are probably wrong. Sentiment often gets in the way of good judgment. For a fair and independent opinion, CEOs and owners should obtain a professional business valuation.
2. Understand where your company fits in the landscape. A business valuation will research and provide an explanation of your specific industry and will place your company in the competitive landscape of your specialized market. It will also tell you the market price of publicly traded companies that are engaged in your line of business.
3. Learn the financial condition of your company. Business owners may think they understand the financial health of their company, however having an independent review and analysis including intangible assets can confirm or deny the theories.
4. Make fast decisions on buying, selling, and mergers. If you are faced with the option to buy, sell, or attract capital for your business, you may not have time to wait to have a business valuation completed. Having a current valuation will enable you to strike while the iron is hot.
5. Stay current. The market is in constant flux. It is important to get regular business valuations because your company, your industry and the economy are continually changing. A business valuation report, completed by an accredited valuation expert who is a member of a professional society working in compliance with established professional standards, may be appropriate for use in courts, for financing and for tax challenges as needed.
Lexington will be glad to introduce you to third-party firms whose specialty is business valuations. Lexington does not offer valuation services.
