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September 29, 2017
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November 2, 2017

Why valuate your business?

Most business owners have a vague idea of what their business is worth, but this is usually a guess, which can be very detrimental in the long run.

A proper valuation, executed by a trained and independent expert, has great value in a variety of situations, amongst others the following:

  1. Succession planning and risk management

Experienced business owners usually make arrangements to sell their shares, at an event such as their death or disability, to any remaining partners or shareholders. In the event of death or disability, life insurance can be taken out to provide the necessary cash to finance the transaction*. It is therefore important to take out adequate life insurance for this purpose, and here a proper valuation plays a role.

  1. Retirement planning

Being a business owner is a fulfilling and enriching career choice. However, a single business can in many situations be the primary provider of financial resources for carefree retirement. It is therefore critically important to look realistically at the growth and expected value of this asset at retirement.

  1. Identification of value or business drivers

The 80/20 Pareto Principle is also very relevant regarding the valuation of businesses. If you have your business valuated make sure you identify these drivers, which, with minor changes, may bring about a significant improvement in the long-term growth and value of your business.

Nobody wants to end up in a situation where their business does not meet expectations, whether at the sale thereof, or at retirement or death. A business valuation, that includes a proper feedback document, could be the start of an exciting new era in your business, where you are empowered to exploit the maximum potential of the business.

For more information on business valuations, please contact Malan Botha at malan@asl.co.za.

* See also our buy-and-sell insurance article.

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