For those readers of mine who happen to be self employed, or own a business, on average you spend twice as much time toiling away at your company than with your family, according to 2004 Harvard Business School study. Many tell me you work hard because you enjoy it, but also to provide a comfortable retirement and an inheritance for children and grandchildren.
Yet, few business owners actually know how much their most prized possession is worth.
For this reason, I want to pass on something I ran across I thought might be helpful: an online business valuation tool by BizEquity, which has 13 million businesses to draw comparisons from and establish a valuation.
The cost to develop a valuation on BizEquity is between $365 and $3,000. To understand the value and advantages of this consider that getting a credible third party valuation of your business historically has required several weeks, lots of disclosure to third parties and a price point that starts at $10,000.
What private businesses are actually worth turns out to be a trillion dollar question as some 25 million businesses will change hands over the next decade according to the Federal Reserve. Some will be sold to family members, some to employees, some to competitors and others to outsiders who just like a particular business.
Whoever the eventual buyer is, a basis for the value of the business will be the first part of the discussion, and having an understanding of the fundamentals that drive value will enhance this discussion, to say nothing of the benefits of coming to the table with a figure in mind.
Further, while the Bush-era tax cuts regarding estate taxes are in their sunset years, currently, the real property of an estate–which includes a proprietorship, partnership or closely held enterprise–in excess of $5.34 million is taxed at a whopping 40%. That means a lot. Making a credible case the business is below a certain value can save hundreds of thousands in estate taxes.
Whoever you sell your business to, the most important outcome is not leaving money on the table that should be going into your pocket.
It may be altogether antic-climactic to mention it, but however you decide to have your business valued, those under, ah, marital stress, might consider having the valuation commissioned by, and delivered to your attorney so that you can reap the protection of attorney/client privilege. There can be nothing more inconvenient than to have a solid number reach the light of day when intense discussions about how to divide assets are underway.
Disclosure: I have no affiliations with BizEquity.
This entry passed through the Full-Text RSS service — if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.