Assessing Your Business Value Gap: Can You Afford to Sell?

Assessing Your Business Value Gap: Can You Afford to Sell?
November 6, 2018 Toohey Reid

You may have spectacular plans for your retirement. You’re going to embark on all that travel you never had time for during your working years. You may settle down on a large slice of land in the country, retreat to the coast, or finally get into woodworking.

Undertaking business valuation improvements may be necessary before selling your business and retiring.

But your dreams can be rudely interrupted if you discover that your business’s sale won’t cover the cost of all of these plans. It’s shocking! You worked so hard; how can something you built from the ground up fail to fund a comfortable retirement? Worse yet, what if it means that you can’t afford to sell your business at all and need to postpone your retirement? Unfortunately, it happens to business owners more often than you think. But there is a way to ensure that it doesn’t happen to you.

What’s a business value gap?

A business value gap is the difference between what your business is valued at today, and what you need its value to be at the time of sale. To assess your business value gap, you need to look closely at your retirement income and assets and compare these to your current and future business value. You need to figure out how much you need to increase your business’s value to ensure a comfortable retirement and how many years this may take. As you can see, the sooner you work out your business value gap, the better. You don’t want to postpone your retirement because you failed to look ahead before selling your business.

Business valuation improvement

So how can you get your business to where it needs to be for you to enjoy the retirement that you’ve envisioned? There are plenty of ways that you can increase your business’s profit and wealth, and it depends on your ability to implement improvement strategies throughout your company. These may include the following:

  • Upgrading systems to enhance workplace efficiency.
  • Providing staff incentives for innovative ideas on how to improve your average sale per customer.
  • Succession planning to ensure that the transition of management is smooth and effective.
Undertaking business valuation improvements may be necessary before selling your business and retiring.

How to assess your business value gap

Sometimes it can be difficult to project your business’s growth to ensure that you achieve the right sale price in the future. And let’s not forget that while you’re undergoing all of the planning involved with selling your business in preparation for your impending retirement, you will also be carrying out the everyday tasks of running the company. The feeling of not having enough hours in the day is all too common. Therefore, you may require professional assistance. The best person for the job? Your accountant and business advisor.

An accountant who is also a business advisor can crunch the numbers to determine your ideal sale price, and then hunker down and help you to figure out the best ways to improve your business value to get you there. They will go about this by first conducting a business valuation, and then your value gap analysis. If the analysis reveals that you need to improve your business value before selling, your accountant and advisor will then get to work generating strategies that will grow your profits within the desired timeframe. The advice of a professional advisor when considering the future of your business, and your standard of living during retirement, is simply invaluable. Conducting a business value gap analysis will provide you with better peace of mind, and the retirement that you deserve.

Contact Toohey Reid today to experience the benefits of having a full team of experienced and professional accountants and business advisors in your corner.

General Advice Disclaimer

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

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