What’s your private company worth ?

No idea ? Here are the Top 10 reasons why business owners should consider a valuation

Private company owners might think the best time to have a professional valuation conducted is when they are considering selling the business. While this is certainly true, many other events should prompt a Private Company to determine its worth — including a desire to better understand how the company’s value can be increased. Here’s a "Top 10" list of good reasons to consider a Valuation :

Identifying your company’s value drivers : Private companies face tremendous competitive pressures. Understanding which activities have a measurable impact on the company’s value can help owners make good decisions that will ensure the continued success of their business. Plus, they’ll have a credible valuation in hand if one of the next nine situations occurs.

Receiving an unsolicited purchase offer : In today’s capital-rich economy, private businesses have become appealing acquisition targets for investors and private equity firms. But before business owners can assess the fairness of an offer, they need to understand what the business is worth.

Appealing to a strategic buyer : Businesses interested in leveraging synergies by selling to a strategic buyer need to understand the hidden assets that may make them more valuable in this type of sale.

Succession planning : Over the next few years, many private business owners will retire or otherwise exit their businesses. When planning for succession, owners must understand how much money will be available to them and to their family following a business transition.

Facilitating a management buyout : Passing on a privately held business to its senior managers is a popular strategy for business succession. To ensure the fairness of this type of transaction, a formal valuation is critical.

Tax planning : The Canada Revenue Agency (CRA) requires businesses to obtain a "fair market value" valuation of their company upon entering into certain transactions.

Dispute resolution : Obtaining a defensible business valuation is a critical step in the dispute resolution process in many situations, including shareholder disputes or cases of potential litigation.

Planning a corporate restructuring : Businesses planning to reorganize, merge, divest a division or acquire another organization - or those considering going public — will need a formal business valuation for both tax and strategic purposes.

Score keeping : A formal valuation provides business owners with an objective assessment of the company’s value versus the competition.

Weighing strategic options : When considering the impact of certain strategic options, it helps to understand the business’s current value. For example, business owners may want to understand the potential impact of optimizing their capital structure, shedding non-core assets, or pursuing operational changes.

Regardless of the reasons for seeking a valuation, business owners benefit from the valuation process itself. The results of a business valuation can present them with a range of alternatives for improving the long-term value of the business, or properly positioning it for succession or eventual sale.

Knowing what your business is worth, and why, is the first step to creating value — and a valuable legacy for your family.