How a Business Valuation can Serve as an Annual Checkup for Your Business

Posted on June 26, 2012 · Posted in Blog

Most people get a checkup at least once a year to evaluate their current condition. Standard tests such as blood pressure, cholesterol levels and heart rate tell a lot about your physical health.

Just as annual checkups are important to assess physical health, an annual evaluation of a business can tell a lot about its fiscal health.

How an Annual Business Valuation can Help Your Business:

Accountability and Performance:  A yearly business valuation assesses how value is created, increased, or diminished based on strategies that management puts in place.

Estate Planning Purposes: With impending changes to estate tax law, business owners must reassess the value of their business to understand how the new laws will impact their estates.  Previous insurance policies and estate planning may no longer cover the potential tax consequences.

Buy-sell Agreement: An annual valuation helps set a standard for the value of your company’s shares for buy-sell agreements.

Internal communication: This is an opportunity to let management and key employees see how they are impacting the value of the company.  Many companies tie bonus and compensation to overall company value.

Financing: Companies in need of lending will find lenders much more willing to work with business owners who understand the value of their business. A valuation lets lenders and outside parties know the current value of their investments.

Investment Options: An annual valuation can enable your company to use shares and equity as currency in the merger or sale of another company.

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