Understand Your Business, Not Just What You Do

by Brittany W. Troop

asba-understand_your_businessHow much is your business worth? Millions of dollars? Pints of blood? Liters of sweat? Gallons of tears?

Many entrepreneurs spend years building their companies, hoping industry expertise will carry them through all the details of ownership (human resources, accounting, benefits, etc.). And many times, it does….at least as long as you stay in the business and at the top. But what if you retire, sell, take on a partner, become disabled, or get divorced? Suddenly, those little details can become critically important.

Donna Robinson, Chairman of ASBA’s Board of Directors, recently sold her IT consulting business after more than 15 years. During sale preparation, she experienced firsthand the benefit of diving into the details to better understand her business.

“As small business owners, we often think our business is worth a lot more than it is,” Robinson said. “We wear a lot of hats, and so, to us, it is worth more. We’ve put so much of ourselves
into it.”

Robinson knew she needed help finding a realistic starting point for negotiations. So she contacted her financial advisor, who provided an informal, complimentary business valuation. Although the buyer paid thousands to prepare a similar value analysis during due diligence, the valuation amounts were about the same, according to Robinson.

“The buyer had a CPA doing their assessment,” Robinson said. “Our company sold for almost exactly what our advisor said, so both sides came back with the same answers, except our valuation was free.”

Robinson recommended that all small businesses engage in a valuation analysis and suggested updating it frequently so owners are able to evaluate less obvious opportunities.

“If we’d done it regularly throughout the years,” Robinson added, “We might even have sold it sooner.”

ASBA has teamed with The Arizona Business Center of The Principal Financial Group to offer members the same complimentary business valuation service used by Donna Robinson during the sale of her company. For more information about this service, please contact info@asba.com.

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