Do you truly understand the value of your business?
If you’re like many executive teams, you’re wrapping up your fall strategic planning session and finalizing your 2016 budget. As a part of this effort, did you also conduct an objective valuation of your business? If the answer is yes, then kudos to you and your team. You are the exception and not the rule. If the answer is no, this blog post is written for you.
Most business executives don’t relate valuation to strategic planning. They believe planning sessions should focus on defining marketing goals, assessing sales pipelines, determining capital expenditures, or assessing operations. The same executives perceive that valuations are only performed when the owner is looking to sell or going through a difficult situation, such as a divorce or partnership dispute.
Leadership teams that assess the market value of their business entity on a yearly basis understand the bigger picture of strategic planning. They strive to run their company for sustainable and profitable revenue growth. Valuation is the only true measuring stick for a business because it takes your business’ historical results, current performance, and investments into consideration. It also factors in critical elements that influence the value of a business entity, such as economic conditions, regulations, and other industry factors.
If done correctly, a valuation captures all of your business’ essential ingredients in one number. If conducted annually, valuation could become an effective tool to gauge results, drive honest discussions and establish realistic baselines for bonuses and pay raises.
It’s not too late to establish the value of your business.