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Business Valuation – Know the Value to Get the Price

Part two of a three-part series on succession planning


Ian Lobo on August 13, 2018 in Business Valuations

Every business owner will exit their business either voluntarily through a planned departure (i.e. the passing of the proverbial torch to the next generation, or via a sale to a third party) or involuntarily through death or disability. Taking the time now to plan for this eventuality provides control and ensures that as an owner, your objectives for your future are met. These considerations include:

  • Providing a means of retiring and financing retirement while ensuring the survival and continued growth of the business;
  • Reduction or minimization of estate and income taxes upon transition/succession;
  • Avoiding the potential for undue conflict amongst family members whose interests may not be aligned or dispute their actual inherited ownership and other benefits at the time of succession.

Start with a valuation of the business. This can be completed by a financial advisor who can provide a third-party, unbiased assessment. Having a valuation in your ‘back pocket’ will assist you in determining whether to transition to the next generation of family or to target maximizing value through a sale to an outside party. Often there can be a large divide between the owner’s belief as to what their business is worth and what the value of that same business is to an outside party. A professional and objective valuation is integral tool to have in your toolbox. It will be used to assist negotiations in completing a potential transaction and will serve to remove emotional biases that may be attached to the sale of a business and ultimately assist in obtaining the maximum price for the sale of your business.