Knowing what your business is worth can change everything.
What is your business worth? You may not know. You might have your own ideas about what it is worth but many entrepreneurs don’t take the time to figure it out. Business valuations are very subjective depending on who is looking at it and the purpose it is being used for. As an entrepreneur, the only thing to keep in mind is that however you calculate the value, keep using that same calculation as a baseline so you can see the changes that are occurring in your business over time.
Business valuations are typically used when someone is buying or selling a business. They can also be used when a bank or investor is looking to provide capital to a business. The most important use for a business valuation is as a management tool. An entrepreneur that is regularly measuring the value of their business is an entrepreneur that will build a success company.
Why does the value of your business matter?
The only real value any of us have is how we choose to spend our time. As entrepreneurs we spend our time managing people and resources. Is the time we are spending worth the effort? How do you know if you don’t measure it? A business valuation is one way to set a baseline for your business that you can use to measure your progress by. If your business is worth a certain amount of money today, how do you get a better result tomorrow?
Knowing the value of your business can also help you decide what kind of plan you need to reach your goals. If you want to build a business that is worth $10MM, what does it take to get there? If you want to build a business that you can sell, how much do you want to sell it for and how much would someone buy it for? Monitoring the value of your business can change everything you do. It can change how you manage your time, people and resources in addition to the opportunities you pursue.
Take the first step.
Take the first step and find out what your business is worth now. Every week, month or quarter, check again depending on how active your business is. As you see the changes in the value of your business, you might begin to notice trends that you can focus on. Maybe you need to focus on cutting costs or growing your margin. Maybe you need to pay down debt or invest in new equipment. Using a business valuation as your baseline for performance will give you new insights and opportunities that you may not be thinking of.
3 other articles you might find helpful if you are interested in building a valuable business:
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