Determining the Value of Your Business Today!
Maybe you own a motel, pharmacy, restaurant, gas station and/or convenience store. Or operate your own IT/software or other professional services firm. We at BeamaLife are extremely familiar with your unique situation and can give you tailor-made information on which to base your key financial decisions.
The value of a publicly traded company is easy to calculate. But when you own a closely-held business, it's much more challenging. And if you come to the wrong conclusion, either overvaluing or undervaluing its worth, you might find yourself missing out on tax-saving strategies, getting too little for your life's work, or in trouble with the IRS.
There are many reasons why you might need to have an accurate assessment of the value of your business. The IRS carefully examines the tax ramifications of every business sale. If you sell for more than fair market value, the IRS might deem the sale a gift to you as the seller. If you sell for less, the IRS might deem the sale a gift to the buyer. Either way, you could be entangled in a tax problem that hounds you for years to come.
Aside from not wanting to run afoul of the IRS, the determination of the value of business by an independent appraiser will help in other ways. Attracting and outside buyer requires that your business be priced competitively enough to solicit bids while profitably enough to help you reach your financial goals. And a buy-sell agreement should require regular periodic valuations of the business as well – just to make sure that all parties to the agreement are protected.
There are many ways to determine the value of your business, and often an average of several ways is used as the actual value of the business. The most common methodologies are the "income" approach, where value is based on expected income generation, the "asset" approach, where value is based on the assets of the business, and the "market" approach, where value is bases on past sales of similar businesses.
The method you choose should be based on the recommendations of a qualified CPA and an independent business valuation specialist. If you haven't had your business appraised recently, it's a good idea to get into the habit of doing it regularly. Learn more about business valuation by speaking with a BeamaLife specialist today at (877) 972-3262 or complete short request form now.