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Why is knowing the value of my business important?
Peter Williamson (Photo: Digiman Studio, provided by NCET)
UBS recently noted in their On-Air podcast that “78% of business owners expect to fund their retirement through their business — but 95% don’t know what their business is worth.” And today, in our COVID world, business values are often quite different than a just few months ago.
Here are five reasons it’s important for you to know what your business is worth:
1. For most owners, your business is your largest asset. To make meaningful financial plans, you need to know your true net worth, which means you need a valuation.
2. Since the business drives retirement decision-making, retirement income, estate planning and the like, business value becomes a key decision-making factor. Undervaluing or overvaluing can both lead to nasty surprises.
3. If current value hasn’t quite reached the retirement target, a valuation becomes a critical decision-making tool. Everything from future growth plans to succession plans will be better informed by knowing what the business is worth today.
4. Knowing business value enables proper risk planning and asset protection. This can make a huge difference to both family financial security and the business itself, should accidents or health issues become an owner challenge.
5. A valuation report that draws on industry statistics can provide insight into the business’ performance relative to its industry. This benchmarking helps you set better business goals.
The bottom line: It’s a really good idea to find out what your business is really worth!
Peter Williamson owns an exit planning and business coaching businesses (www.peterwilliamson.actioncoach.com) and is NCET’s co-VP for Tech Wednesday. Peter has 14 years’ experience coaching business owners and is a BEI Certified Exit Planner, an ActionCOACH Certified Business Coach and a BizEquity Certified Business Valuation Advisor.
What are the benefits of hiring a business consultant?
Lindsay Bradley (Photo: Jeramie Lu Photography, provided by NCET)
Business owners can quickly become overwhelmed by the challenge of navigating multiple areas of the business- finances, human resources, risk, operations, etc. especially if they are experiencing a surge of growth, a stagnant trajectory, or in 2020’s case, figuring out how to diversify and adapt.
Here are some reasons why partnering with a consultant could be right for you and your business goals:
1. Objective perspective. Owners tend to make decisions with cognitive bias and being too deep in the weeds leads to an inability to see things clearly. This is especially prevalent in businesses that have been on “cruise control” or family-run businesses where dynamics and relationships tend to get in the way of pragmatic decision-making practices. Consultants are not emotionally invested in the business, which allows them to bring a fresh eye and more easily identify and address challenges.
2. Executing on short-term goals. Small business owners often wear several hats and that means constantly balancing competing priorities. A consultant can help organize and strategize the best way to execute ideas, establish processes, and most importantly put a checkmark next to that stack of unfinished projects you have been meaning to get to.
3. Cost/time savings. Unlike bringing on an employee, consultants can be used for a predetermined period of time to accomplish specific projects and have a set fee to do so. This is a great way to control your budget and benefit from their expertise and best practices to get things done more efficiently.
Working with a consultant can help bridge the gap between treading water and forging a path forward. If you choose to partner with a business consultant, especially if they will be involved in an operational or human resource capacity, I highly recommend taking time to explain to your team the “why” behind your approach. This will help set the tone, increase buy-in, and more importantly, your team will become your advocate for future growth plans and contribute to the long-term success of your business.
Lindsay Bradley is the founder of Guided Arrows (www.guidedarrows.com), a business consulting firm focused on empowering businesses to move forward. She is passionate about optimizing business operations, elevating people, and creating value through innovative, conscious, and sustainable strategies. Lindsay currently serves on the NCET Board of Directors as VP of Email Services for Biz Bite and Biz Café.
NCET (www.NCET.org) is Northern Nevada’s largest member-supported nonprofit that produces educational and networking events to help people explore businesses and technology.
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