The ultimate goal of proper financial management is to ensure that your company has the maximum value possible when the time comes to sell. However, you should not wait until you want to sell your company before you do a valuation. Just as a periodic due diligence review helps you identify where your processes need improvement, a regular valuation of your business helps you determine where your finances need improvement. Frequent market valuations ensure that you are on track to achieving your financial objectives and making your company as marketable as possible.
So, other than prior to a sale of your company, you should obtain a valuation before you:
- Meet with lenders or investors to discuss raising capital.
- Transfer stock.
- Meet with estate planners.
- Meet with the tax authorities.
- Sell a division of your company.
- Acquire another company.
- Establish an employee stock option plan.
- Set up a profit sharing plan.
- Execute a buy-sell agreement.
- Buy the stock held by another stockholder.
- Sell your shares to another stockholder.
Keep in mind that, when you conduct your valuation, you should engage the services of an independent appraiser if you do not have anyone on your staff that has the expertise to do a proper valuation. Unless you are actually selling the company, it may not be necessary to obtain a full scope valuation, which can be quite expensive. However, an expert can be engaged to guide you through the process to ensure you do it correctly, and can also advise you on steps to take in the future to increase your value and marketability.
As an alternative to professional appraisers, you may want to consider working with an experienced investment banker, whose primary business is managing the sale and acquisition of companies. An appraiser may only be able to give you an estimated value for your company, but an investment banker can tell you what you can really expect to receive in current market conditions.