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June 2015 Tip of the Month

Business Valuations Aren't Just Needed in Disputes or at Death

But first...A QUICK ABO AND COMPANY THANK YOU

With April 15th now two months behind us (not to worry, most of us here at Abo and Company are also on extension) we want to thank those clients we did complete for your reliance on our tax services. It seems legislation affecting the Tax Code has become a common event. This year, it looks like we may be in for a roller coaster ride. A number of popular tax breaks expired at the end of 2014, unless Congress resurrects them. Additional legislation is possible this year as the topic of "Tax Reform" continues to be discussed in Washington. However, given the fact that it's an election year, we may well have to wait until after the November elections to see what happens. Of course, with tax legislation, nothing is certain.  Stay tuned.

BUSINESS VALUATIONS AREN'T JUST NEEDED IN DISPUTES OR AT DEATH

So owning your own business is becoming a drain on your personal lifestyle?  Maybe you're thinking "...now's the time to kick back and enjoy."

Why not sell your business and sail off into the sunset?  What? You don't have a clue what the business is worth?  Well, you're not alone!

During the course of any fiscal year, business owners ask this important question - "How much is my business really worth?" - more times than they'd like to admit.  They rarely admit to this because, frankly, many of them have no idea of the real value of their business.

Certainly, there are those business owners who have a "rough idea" of what the property and other capital assets are worth, but they realistically have no concept of what the intangible assets or "goodwill" could be valued at.  Consequently, most business owners only have a "ball park" figure that they use.  Remarkably, that number often remains the same in their minds for a long period of time.

Maybe if you knew how much your business was worth you wouldn't want to "...sail into the sunset"!  Perhaps armed with knowledge of the value of your business, you could transform it into an industry leader!

What can a valuation do and how can it help an owner more effectively handle the daily operations of the business?

Owning and operating a business requires the owner to make many decisions.  Knowing what a business is worth makes facing these decisions much easier and can be used as a starting point for planning ways to increase its value.

For instance, reducing the risk factors enhances the value.  A business that has only a few customers may have more risk than one that sells to a large number of customers dispersed over a wide geographic area.  Changing the customer base may reduce the risk and thus increase the business value.

Each business is unique and identifying the value of a business is a complex procedure.  Cost, income and market information all must be gathered and analyzed in several different approaches to accurately provide a valuation that will give the owner information needed to improve the financial condition of a business. 

After a valuation of a business is complete and the results have been analyzed, the owner will often be able to make adjustments to the operational efficiency of the business by simply looking at the numbers and uncovering some of the hidden strengths and weaknesses.