There is hardly a definitive ‘right’ time to perform a business valuation for various reasons. However having gone through this process with business owners so many times, we have a guideline as to when a business valuation is to be performed.
If you are thinking of exiting your business at some point in the near future, it is important to begin the valuation process as early as possible. As achieving a high business valuation is dependent on several factors, there should be ample time for the business owner to implement strategies or tactics to achieve the desired exit goal.
An early valuation analysis, conducted once the business is off the ground and in full operation, will provide a business owner with metrics (such as sales and net income) that can be used to set long-range exit goals. Using the valuation analysis, the business owner can determine what type of performance will be necessary to exit at a desired sales price.
At the end of the day, a business is ultimately worth what someone else is willing to pay for it. But given the general acceptance of certain valuation methodologies, a seller is always best served by being aware of the values derived through these various methods.
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