Valuing your business is an indispensable part of the exit process. But even owners who aren’t planning a sale can gain a lot from a clear business valuation. The task can feel overwhelming, but a few simple considerations can make it more manageable.
Keep Your Expectations in Check
You’ve run your company for a long time. The challenge is that you can’t put a price on good work. So don’t expect that the business’s value will necessarily reflect all the work you’ve put in, nor your emotional connection to the company. Value is in the eye of the beholder. So while you might have some idea of what your business might be worth, you won’t know for sure until you get a business valuation.
A third party valuation from an experienced investment banking firm is especially helpful to companies that want to increase value. The investment banking team will deliver an objective assessment, including an overview of weaknesses. Rather than feeling defensive or disappointed, listen carefully. Then get proactive.
Embrace Transparency
Every owner wants to protect their business. However, an accurate and fair valuation demands openness. The valuation team can draw on previous experience, but they really can’t tell you about your business without knowing it all: the good, the bad, even the scary. Even something as seemingly irrelevant as a property lease rate can impact value. So give all of this information, and be prepared to answer some pointed, difficult questions. Know that not knowing the value of your business can lead to serious mistakes. So providing clear and accurate information is actually a great way to protect the long-term health of your business.
Leave Your Emotions Out of It
Your business is a lot like your child. No one likes to hear critical comments about their child—or their business. While you might be tempted to highlight the work you’ve put in or the strong suits your business boasts, know that a valuation expert is paid to be objective—not to make you feel good. It’s helpful to highlight positive trends that are supported by facts and figures—not emotional highlights. Constructive criticism can be painful, but provides valuable information about areas of potential improvement.
About Madison Street Capital
Madison Street Capital is an international investment banking firm committed to integrity, excellence, leadership and service in delivering corporate financial advisory services to publicly and privately held businesses.
Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner. Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.