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The Importance of Business Valuations Before Retirement

The Importance of Business Valuations Before Retirement

Most small business owners know that planning for retirement is crucial. But according to an article from Entrepreneur, very few business owners are aware of their operation’s true value or take steps to receive accurate business valuations well before considering retiring. This makes it difficult to ensure they receive adequate compensation for their business to fund their retirement.

The article cites surprising research. According to CNBC and the Financial Planning Association, 78 percent of small business owners are planning to sell their companies to fund between 60 to 100 percent of their retirement. In addition, a recent survey by Manta, which provides research and resources for small businesses, found that nearly 60 percent of small business owners in the U.S. plan to retire before the age of 65, though 34 percent do not currently have a retirement plan in place.

The article emphasizes the importance of knowing the actual value of your business long before you begin making plans to retire. This information can give business owners an upper hand as they begin negotiations to sell their business. Accurate business valuations also enable business owners to make “realistic, well-informed and profitable decisions during every stage in the life cycle of their business,” according to the article.

Some business owners delay taking steps to learn their business’s valuation, the article says. Many owners see the valuation process as expensive and time-consuming, but advances in technology have made getting accurate business valuations online quicker and less intrusive.

The article recommends business owners start taking steps now to ensure they know their business’s real value, long before they begin to consider retirement seriously. Knowing a business’s worth gives small business owners knowledge, flexibility and negotiating power at every stage.

About Todd Taber

Todd Taber

Todd is an assistant editor for Hardware Retailing magazine. An Indiana native, he graduated from Indiana University where he majored in journalism and French. Throughout his career, he has aimed to highlight small businesses and their community value. He joined NRHA in 2017 and now serves on the news and marketing teams. In his free time, he likes to run, spend time with family and work his way through Charles Dickens’ bibliography.