Increase your market insight and business marketability with a professional business valuation
Strong business owners pour a lot of blood, sweat, and tears into their businesses. They work hard to make a living for themselves and their employees, but they often don’t have a sense of the bigger market picture.
If you own a plumbing or HVAC business, you know exactly how much you take out of the company every year. You know how much the business is spending and earning every year. But do you know how much it’s all worth?
A professional valuation can help you answer this question. Whether you plan to sell your plumbing or HVAC business or not, there are compelling reasons to obtain a professional valuation. Here is a look at the benefits.
1. Resolving tax or legal issues
A professional valuation of a plumbing or HVAC business can be critical for resolving certain tax or legal issues. In the case of death or divorce, for example, a valuation can help you determine how to split up the assets of the company.
Similarly, if a partner is leaving the company, a professional valuation can guide buy-out numbers. Valuations can be critical when determining the value of company stock given as gifts or donated to charities. Even making the leap from an S corp to a C corp requires a valuation.
2. Obtaining a better understanding of company assets
If you know how much your assets are worth, you can identify the businesses’ minimum selling price needed to make a profit. A business owner who doesn’t understand the value of their assets may undervalue their company and walk away with significantly less than they deserve.
Selling the assets on their own, in this type of situation, would have netted the business owner more than they accepted for the entire business. Even if you don’t want to sell your business, a professional valuation of your assets can help identify how much insurance coverage you need and set reinvestment targets.
3. Tracking the growth of your business
As a business owner, you work hard every day to bring profits into your company. Over time, your goal is to grow the value of your business, but how can you track growth if you’re not sure of your starting point?
A professional valuation can also help you establish a current benchmark for your company’s value. Then, when you get another valuation in the future, you can see how your company has grown.
4. Creating a record of your growth
Many analysts recommend obtaining a professional business valuation every year. A record of your business’s value allows you to track its growth over time. Most investors want to see steady growth, and this information can be a valuable tool to leverage if you ultimately decide to sell your business.
5. Improving your negotiation position
The more you know about your business’s value, the better the negotiation position you have. When another business is trying to merge with or acquire yours, their objective is to pay the lowest price possible.
A professional valuation breaks down the value of your business, giving you the knowledge you need to negotiate a higher price. You can use the details of the valuation to back up your claims about the business’s value, and the buyers are more likely to take you seriously because the valuation has been handled by a reputable M&A specialist.
6. Developing valuation projections
A professional valuation can also help you make projections about future values. In particular, if you’re trying to attract investors, you may want to work with a professional evaluator to create projections on how their investment can fuel your company’s growth.
The more information you have, the more persuasive you can be when trying to convince someone to pour capital into your business.
7. Contextualizing the value of your company
Both internal and external factors affect the value of your company. If you simply have a few numbers on paper, you may not be able to determine exactly how or why your company has grown.
A professional evaluator can help you understand what the numbers mean. They can help you see which part of your increase in value is due to the intrinsic growth of your company and where external factors have boosted the value.
8. Getting to know your business
You can use a professional valuation to identify the areas that are creating or destroying value in your HVAC or plumbing company. This knowledge can guide your decisions and target areas where you need improvement. When you don’t know which variables are affecting the value of your business, you may not know where to focus and could put your efforts in suboptimal places.
An in-depth understanding of your HVAC or plumbing company’s value helps make you a more effective business owner. You can use valuation numbers internally to track growth and progress. But you can also use these numbers to attract investors, negotiate mergers, and ensure you get the best price during an acquisition.
Profits and income only reveal a portion of your business’s success. To understand the big picture, you need a professional valuation.
Contact SF&P Advisors for a free valuation
At SF&P Advisors, we work with business owners of HVAC and plumbing companies to guide them through the mergers and acquisitions process. We work with businesses and investors on both sides of the table, and whether you’re trying to sell your business, bring in capital, merge with another entity, or buy a business, we can help you.
Regardless of your goals, the process almost always starts with a free valuation. To learn more, contact us today.