If the idea of a business appraisal only brings thoughts of retirement or selling your company, think again.
A valuation can serve many purposes other than preparing your business for sale so you can head to the beach. Think of it as a checkup that can help you better plan for the future.
Strategic planning
Today’s economy presents both challenges and opportunities for companies across the country. Chief among the challenges is obtaining financing when necessary — interest rates have risen, inflation is still a concern and many commercial lenders are imposing tough standards on borrowers.
A business valuation conducted by an outside expert like Rudler can help you present timely, in-depth financial data to lenders. The appraisal will not only help them better understand the current state of your business, but also demonstrate how you expect your company to grow. For example, the discounted cash flow section of a valuation report can show how expected future cash flows are projected to increase in value.
In addition, a valuator can examine and state an opinion on company-specific factors such as:
- Your leadership team’s awareness of market conditions,
- What specific risks you face, and
- Your contingency planning efforts to mitigate these risks.
As you go through the valuation process, you may even recognize some of your business’s weaknesses and, in turn, be able to address those shortcomings in strategic planning.
Acquisitions, sales and gifts
There’s no getting around the fact that, in many cases, the primary reason for getting a valuation is to prepare for a transfer of business interests of some variety — be it an acquisition, sale or gift. Even if you are not ready to make a move like this right now, an appraiser can help you get a better sense of when the optimal time might be.
If you are able to buy out a competitor or a strategically favorable business, a valuation should play a critical role in your due diligence. When negotiating the final sale price, an appraiser can scrutinize the seller’s asking price, including the reasonableness of cash flow and risk assumptions.
If you are thinking about selling, most appraisers subscribe to transaction databases that report the recent sale prices of similar private businesses. A valuator also can estimate how much you would net from a deal after taxes, as well as brainstorm creative deal structures that minimize taxes, provide you with income to fund retirement and meet other objectives.
In the eyes of a potential buyer, a formal appraisal adds credibility to your asking price as well. And if you want to gift business interests to the next generation in your family, a written appraisal is a must-have to withstand IRS scrutiny.
Going the extra mile
You probably have plenty of other things on your plate as you work hard to keep your business competitive. But obtaining an appraisal is a savvy way to go the extra mile to get all the information you need to wisely plan for the future. Rudler, PSC can support your company throughout the valuation process and help you make the most of the information you receive. Consider contacting your Rudler, PSC advisor at 859-331-1717 for more information and if your business would benefit from a valuation.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Leah Miley, Staff Accountant and Evan Kandra, CPA.
If you would like to discuss your particular situation, contact Leah or Evan at 859-331-1717.
As part of Rudler, PSC's commitment to true proactive client partnerships, we have encouraged our professionals to specialize in their areas of interest, providing clients with specialized knowledge and strategic relationships. Be sure to receive future Rudler Reviews for advice from our experts, sign up today !