"Every CEO or president of a company should have a current business valuation in his or her desk drawer," says Bruce Bingham, senior managing director with Trenwith Valuation in New York. "It's the only way to make informed decisions about the direction your company should take."
Bingham is right on the money. In fact, top business valuation experts convened recently in that unlikely of all conservative places, Las Vegas, to discuss emerging issues including a company's fair value, the ins and outs of determining the worth of private equity funds, the worth of intangibles, and new regulations governing business.
The American Society of Appraisers strongly suggests that every company, whether publicly traded or not, have a current business valuation and in fact, has come up with the top reasons why companies benefit from having such a valuation:
- Know what your company is worth. It sounds simple on the surface but many business owners have no idea what their business is actually worth and if they think they know, studies show that they are generally wrong. Why? Because it is said that sentiment gets in the way of good judgment and many owners are simply not realistic.
- Understand where your company fits in the landscape. A business valuation researches and provides an explanation of a specific industry and can place your company in a competitive landscape in your specialized market.
- Learn the financial condition of your company. A little different from what a company is worth because business owners tends to think they understand the financial health of their company--and the emphasis is on "think"--rather than having concrete answers.
- Make fast decisions on buying, selling, and mergers. If a business owner is faced with the option to buy, sell, or attract capital for the business, that party may not have the time or luxury to wait until a valuation is completed. But, having a current valuation enables the owner to strike while the iron is hot.
- Staying current. The market is in a constant flux, or is that an understatement? Accordingly, it is vital to get regular business valuations because the company, the industry, and the economy are constantly changing.
Donna Walker, International President of the American Society of Appraisers and a principal with Columbia Financial Advisors in Portland, Oregon, points out that in this present climate of accounting scandals and quickly evolving corporate accounting legislation, it is vital for companies to be knowledgeable about regulations which mandate valuations. "Even if your company isn't required to have a business valuation, it is still important to your company's future to know exactly what it's worth."So, a healthy and happy New Year!
