19th May 2011
Because of the economic downturn, many business owners are reluctant to think about the value of their businesses. Fearful that their businesses have lost value, it’s the last thing they want to hear about. An article in Financial Advisor suggests that many business advisors are urging their clients who own businesses to have their businesses valued in order to gauge their business health and for planning purposes, including adjusting estate and succession plans.
Business owners have different reactions when they find out that their businesses are worth less than they once were. Some decide to delay selling their business, and others use it as an opportunity to make necessary changes. One business owner who was interviewed said that he was glad to know the value of his business because it enabled him to determine steps he needed to take to improve the business and prepare to potentially sell it within 10 years.
According to experts, some businesses are worth 30% less than a few years ago, and they argue that understanding the value of a business can help owners determine whether or not they should sell their business or bequeath it to the next generation. On a positive note, a lower valuation can benefit owners in terms of taxes right now. The article highlights the fact that if owners are planning to pass on the business to their children, now might be the time to do it, since estate taxes are “expected to rise next year and new restrictions on use of trusts could also be coming soon.”
By: Nathan Bazzle, CMEA