Start Where You Are: Understanding Business Valuation As A First Step

We hope you are doing well and staying healthy. In turbulent times, it is even more imperative that business owners understand the value of their business, and what metrics drive valuation. We strongly advise owners to use this time to look internally at their own business; understanding the value of your company is the first step in planning for your eventual future succession.

In order to best serve business owners, Calder Capital is extending our $500 off valuations throughout the month of April. We received wonderful feedback from our promotion in February and March and look forward to serving even more businesses this month.

For businesses valued under $2MM, over 50% of owners do not plan at all before they sell.

If you do not know the value of your business and have not done any succession planning you are not alone! Many business owners have not taken these important steps. The chart above from the International Business Brokers Association (IBBA) 2019 Q4 Market Pulse Report shows that the majority of sellers for businesses valued at less than $2MM do no planning before they sell. Unfortunately, this lack of planning leads to added stress and uncertainty; and confusion about when to sell and how much is enough. As the proverb wisely says, “The best time to plant a tree was 20 years ago. The second best time is now.”

The IBBA report expounded upon the lack of planning. “In 2019, nearly half of all small business sellers were planning to retire. Even with retirement leading as the number one reason for sale, most sellers do not engage in a proactive planning process, particularly in the Main Street market,” said Lisa Riley, principal, Delta Business Advisors. “Generally, the smaller the business, the less likely the owners are to do any planning prior to going to market. Of the sellers who plan ahead, most are moving through the exit planning process at a rapid pace, with less than a year between the initial consultation and market listing.”

If you do not know the value of your business and have not done any succession planning do not feel bad! “The best time to plant a tree was 20 years ago. The second best time is now.”

Consider what we believe is happening in the current marketplace. We see this in our own client base as well as in a study of the last dramatic downturn, the 2009 business-for-sale market. The current supply of businesses for sale is dropping considerably, whereas the demand of buyers remains strong. In fact, between March 1st – 14th, Calder experienced 649 buyers actively seeking information on our for-sale clients. That number has continued to rise throughout March. Economics would tell us that given the drop in supply and the steady or growing demand, that buyers are fighting over fewer businesses for sale. While certain challenges abound, from a supply-demand dynamics standpoint, now might be an interesting time to sell and particularly so if your business displays facets that are desirable during Recessions.

To be clear, we are not advocating a rash decision to sell. For most business owners, a crisis like we are facing currently presents a fork in the road, whereby an owner has to choose: do they want to spend years rebuilding their business before selling or is it better to sell now into a market where, based on history, buyer demand will continue to grow?

Understanding the value of your business is the first step in making an educated decision.

What is Your Business Worth?

As you navigate the uncertainty of 2020, are you aware of the value of your business? Business valuations are one of the most underutilized tools for business owners. Despite the common belief that the only need for a business valuation is when you are preparing to sell, there are many reasons to conduct a business valuation. It is crucial to understand the value of your business, otherwise, how can an owner know where they are from a succession-planning standpoint?

Calder Capital is offering $500 off business valuations throughout the month of April. Visit here to take advantage of the offer and get started on your business valuation today! Or contact Sam Scharich with questions: sam@caldergr.com.

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Calder Capital, LLC