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Three Tips for Evaluating What Your Company is Worth

February 12, 2016

Filed under: Estate Planning — Neel Shah @ 9:15 am

When thinking about the future of your company and the value of business succession, it is extremely beneficial to be knowledgeable about how this process works and some of the common pitfalls associated with business succession planning. The more that you are prepared for what to expect, the easier it will be for you to identify the future course of your company and the individuals and planning documents that can help you accomplish your goals.shutterstock_185709734

First of all, you need to know the true value of your business outside of your own personal attachment to it. This is why you should engage with an experienced valuator who can provide the proper information to you. Additionally, there are various times when it’s beneficial to understand the value of your business. There are major changes constantly happening in the regulatory competitive and economic landscape in which the majority of businesses exist today. So you need to be aware of the value of your business at numerous different times.

Finally, you need to be aware of potential value gaps. Once you have identified the value of your business with a third party valuator, there is likely a discrepancy between what you thought the company was worth and what you need the business to be worth in order to sell it or pass it on. Proper planning, however, can be critical for reducing these value gaps generated by an owner’s underestimation or overestimation of the business value. One example includes qualified plans and other investments that can help to reduce the value gap in your retirement plan generated by a business valuation that comes in lower than you expected.

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