Business Valuation Matters

Jim Lorenzen, CFP®, AIF®

Business valuation matters!   And, not just when you plan to sell.   Few business owners realize that valuation ‘what-if’s’ can help determine the advisability of major purchases and investments, not to mention the implementation of pre-funded buy-sell arrangements.   Yet, of the more than 200 million businesses in operation globally, fewer than 2 percent value themselves annually.   Over the next 10 years, approximately 10 million businesses will change ownership, according to BizEquity, but 75 percent of small business owners don’t know what their business is worth.

Business owners often hold mistaken assumptions about their business’s value, he says; technology companies often overvalue themselves while retailers, manufacturers and professional firms don’t value themselves highly enough.

The lack of knowledge puts small and midsize business owners at particular risk because they are unaware of how to create the right capital structure for their business, what amount of insurance to buy or how to plan for a business transition into retirement.   According to BizEquity, 50 percent of small businesses are uninsured and more than three-quarters of business owners plan to fund 100 percent of their retirement through the sale of their business.

How do you establish business value?  You might find our report helpful.  You can learn more here.



Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® serving private clients since 1991.   Jim is Founding Principal of The Independent Financial Group, a  registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.