What is Your Business Worth?, with Bill McDermott, Host of ProfitSense
In this commentary from a recent episode of ProfitSense, Bill McDermott asks business owners to consider what their business is worth, and why an informed answer to that question is so important.
Bill’s commentary was taken from this episode of ProfitSense.
Bill McDermott: I’d like to talk about the one question every business owner should be able to answer, and that’s: what’s my business worth?
In a recent study, business owners were asked what they estimated the value of their business to be. Ten percent didn’t have a clue. The other 90% answered in a wide range between $500,000 and $100 million.
When asked how they arrived at that valuation, two-thirds answered that they had no specific method or that they used some kind of informal methodology. Only 1/3 answered that they obtained an independent valuation from a qualified professional.
But it’s crucial to know the true value of your business for two main reasons:
- To make informed decisions about the future, such as whether to sell, expand, or make other major changes. For example, if you know that your business is worth a significant amount of money, you may be more likely to consider selling it in the future. Or, if you know that your business is growing rapidly, you may be more likely to consider expanding into new markets.
- To attract investors or partners. If you are looking to attract investors or partners, knowing the value of your business can be a valuable asset. Investors and partners will want to know how much your business is worth before they commit any money or resources. By having a professional valuation, you can show potential investors and partners that your business is a sound investment.
Typically, our business is the largest asset on our personal financial statement. We should know the value to make informed decisions.