by Curnow & Curnow, PLLC. • May 5, 2014 • Blog

A Business Valuation Helps Keep A Finger on the Pulse of Your Company

You pour a lot of time and resources into running a successful business, but sometimes a problem may seemingly appear out of the blue. The fact is, most problems that seriously impact the value of a business do not appear overnight. A regular business valuation will allow you to keep a finger on the pulse and know when issues start to emerge. A small problem can be nipped in the bud before it becomes a potentially bigger, more expensive and irreparably damaging one.

Private firms, unlike publically traded companies, do not have to continually report their financials or have a firm business valuation each year. This makes it easy to lose track of how your business is doing, and ultimately can affect your company’s future.

Milestone Business Valuations Are Not Enough

Most business valuations only occur during milestone moments, like succession planning, selling a business, or capitalization. These valuations do not give owners a true picture of the health of their business. Instead, they help those who are about to take it over. By taking advantage of regular business valuations – even when you are not selling your company – you could identify your weaknesses and gain insights into your true competitive advantages. If you need to seek outside funding or investors, having a thorough business valuation completed is important too.

Business Valuations Are More Than Cash Flow Assessments

It is next to impossible for a business owner to do a constructive valuation of their own company. Most will end up focusing on cash flow as the most critical factor. Others might compare the sale of similar-sized companies to their own to arrive at a market value. A true valuation goes much deeper than a quick appraisal.