Bob Gauvreau explains that business valuations are strategic tools used beyond one-off events — they establish a point-in-time value of a company (like a property appraisal) and are important for capital raising, shareholder exits, divorce settlements, succession planning, and tax/corporate restructuring. He recommends obtaining valuations when triggered by events and suggests annual valuations for firms actively raising capital; he also references a Value Builder Assessment (free tool) to identify eight factors that influence business value.
Chapters
Okay, let's talk about the long term benefits of having business valuations. So really, you don't want to do this too often in your business unless you have intentions of capital raises and wanting to pull in investors to help grow your business. Right, raising capital. So business valuations essentially take your business at a point in time and you establish a value of what it's worth. Now if you imagine this as almost like a property appraisal where at a certain date this is how much the property is worth, it's worth this much based on all of the available data that's in the marketplace about similar properties and what those properties are selling for. So in essence, that's what your business valuation does for you. Now it typically again, doesn't happen frequently unless something, an event is happening that you need one completed. So sometimes divorce is one of those situations. You know, you need a business valuation to ensure that the separation is correctly documented and all of that. If you have a shareholder that's exiting the business, you tend to have a valuation. A lot of times it's written into a shareholder agreement that if one of the shareholders is to depart, that is going to be based on the valuation created from a business valuator and then also looking to sell or have succession plans from your business. Getting a business valuation will help give you an idea of what the value is worth. And then lastly is when we do any sort of tax planning, sophisticated sort of corporate restructuring of your business, every time we do that, we're going to need a business valuation so that we can freeze the value or adjust the value or adjust the ownership, but we need to know how much the shares are worth inside your business. So for a lot of businesses that are looking to raise capital and really start to grow, having a business valuation and showing a pattern of increased value over time is a really great perspective when you can bring that to potential shareholders to show the development and valuation that's been created over a period of time to substantiate that sort of value appreciation for potential investors. For one, two, if you're going to do any sort of capital raising, I would suggest you probably do it annually because you're going to have to get a business valuation done when you go to raise that capital. Because it's going to be very important to understand how much each person's share is worth. So you could do it annually, you could do it more frequently than that as well. But you know, for the most part annually would be the, the maximum that I would sort of say of a frequency and otherwise we just wait for those periods of time where an event is triggering a business valuation. It is an investment but it is really nice to have a model to demonstrate why your business is worth what it's worth and how similar businesses have maybe sold to give you an idea of maybe some of the weaknesses that you may or may not have inside your business. The other thing I would say and what we'll try and do is drop a link in somewhere, maybe even just on our YouTube page. But there's a business value assessment, it's called a value builder assessment where we essentially help you identify the eight factors that will contribute to your business's value. So what we'll do is we'll try and get a link in here somewhere. Take that. It's a free assessment for you to understand an estimated value for you. It's not a business valuation but it will identify the areas of weakness for you to improve the value of your business over the long term.
