Establish Your Location
The reality is every business owner should have a current business valuation. We can assume that a main goal of most business owners is to grow the value of the business.
With that in mind, the main benefit of a current valuation is this: all business planning needs a starting point against which all business actions can be measured. How else will you know if the work you did or the strategies you tried actually produced a higher business market value?
Update Annually
Once you have a baseline valuation, you should have it updated regularly. Consider the annual rhythm of filing your taxes on time and then automatically sending your year-end financials and return to your Viking advisor to update your business valuation. This sort of regular valuation update is an important routine because it provides you with a natural, systematic time each year to take stock of your efforts during the prior year and to adjust your plans for the current year.
Another reason to update your business valuation each year is because the market for private businesses is constantly adjusting. The market value of one dollar in cash flow last year may not be the same this year. For example, if you valued an RV dealer, outdoor retailer, boat dealer, or motorcycle dealer in 2019 and 2021, their value in 2021 would be significantly higher even if they did not grow sales simply because the markets have changed. The same story is true with wedding and special event venues, but in reverse.
Consult the Appropriate Professionals
Economic climates, business conditions, and the overall desires of the consuming public are constantly adjusting, and Viking is in the unique position of having their finger on the pulse of all of it by virtue of the fact that we are actively interacting with buyers and sellers every day.
On the other hand, the local accountant with a valuation practice will not be able to generate an accurate market value because they are not “in” the market every day. While the accountant can place a value on a set of financials, they have no way of knowing that, for example, in the last year HVAC dealers have become a trending industry in the eyes of the private equity world. An HVAC dealer that was worth 3 times cash flow last year is probably worth 4-5 times cash flow this year. An accountant is not positioned to capture that change. Viking can provide market-based valuations that capture rapidly shifting business conditions.
Do you need to establish a baseline valuation for your business? Do you need to get on a schedule for annual updates? Remember that Viking offers no-cost business valuations, and we are here to help. Contact us today for more information.