If you’re a small business owner, you’ll likely want to know what your business is worth, at some point or another. Knowing your organization’s value can help you make important decisions about whether you’ll want to sell it in the future, choose to expand, or make changes to help it run more smoothly and profitably. A small business valuation appraisal can determine what your company is worth and can point you in the right direction as far as your future decisions. However, there are some mistakes that business owners make when it comes to small business valuations. Here are just three of those mistakes that you’ll want to avoid.
- Spending too much (or too little) on the small business valuation appraisal
While large corporations often spend several thousand dollars on a business valuation, that may not be necessary or realistic for small business owners. As an organization becomes more complex and more profitable, it becomes more important to spend a larger amount of money on these valuations. While free services can be helpful up to a certain point, you do get what you pay for; your valuation could easily be inaccurate when you use these. For most small businesses, it’s a good idea to use affordable business valuation software or a service that specializes in working with small businesses in particular.
- Forgetting about significant liabilities or assets
Assets and liabilities are a vital part of determining your business’s value. When a small business is transferred, it’s usually done as an asset sale, with the seller paying off the liabilities. If you’ve acquired additional assets in the time you’ve owned your business, that will positively affect your value; the opposite is true of any liabilities that you’ve assumed. Make sure to factor these in to your small business valuation appraisal for accurate results.
- Waiting too long to get a valuation
For many owners, the idea of obtaining a business valuation tends to come up when they want to sell their business. The problem with this is that this is typically too late in the game to change the value of their business if they don’t like the results. You should actually get a small business valuation appraisal very early on (at least a year before you’re looking to sell). This will give you enough time to make some changes that can have a positive effect on your value and will enable you to sell your company at a higher price in the end.