Gain powerful insight from business valuations

Enhance your business now and set the stage for a successful transition

To you and your family, your business may be priceless. But do you know what it’s actually worth?

Most business owners have a general sense of their company’s value — informed by years of industry experience, market awareness and knowledge of competitors. That instinct is useful, but is not a substitute for a professional business valuation. Relying on informal estimates alone can leave you underprepared when the time comes to transition out of the business.

A formal business valuation doesn’t have to wait until a sale or other transition is imminent. In fact, the earlier you obtain one, the more power you have to shape the transition outcome.

Start early

Getting a valuation well before any transition provides the time needed to act on what you learn. The earlier you know what your business is truly worth, the better positioned you are to strengthen value drivers, address weaknesses, and influence how your transition unfolds.

A professional valuation shines a light on the factors that matter most to potential buyers or successors, including issues that may take years to address:

• Key-employee dependency. When business success is tied to one or two individuals — including the owner — buyers typically apply a discount to reflect that risk.
• Client concentration. A disproportionate share of revenue concentrated among a small number of relationships can suppress valuation.
• Operational risks. Underlying risks that do not surface in day-to-day operations may quietly erode business worth.

Align your valuation strategy with your transition goals

How you plan to exit your business matters to your valuation strategy.

• If you plan to transfer the business to a family member, a lower, strategically timed valuation may help minimize gift or estate tax exposure. Early planning allows the time needed to use transfer vehicles designed to reduce that burden.
• If your goal is to sell to a third party, you likely want your final valuation to be as high as possible. Understanding the value drivers today allows you to strengthen them before going to market.
  
  

Think of valuations as a roadmap, not a one-time event

A single valuation is a snapshot. A series of well-timed valuations becomes a roadmap — one that tracks your progress and equips you to make well-informed decisions at every stage.

Use your valuation to make smarter business decisions

A credible, current valuation isn’t just preparation for an exit — it’s a practical tool for ongoing decision-making:

• How much liquidity will you need to sustain your lifestyle once you’re no longer running the business?
• Could you afford to bring in a partner rather than sell outright?
• Would a transfer to family members or employees be financially viable?

Armed with a solid valuation, you can model the financial outcomes of different paths — an outright sale, a partial ownership transfer, a succession plan — and make choices grounded in real numbers rather than assumptions.

Choose the right valuation approach for your business

The three primary valuation methodologies generally align with specific business types and have distinct tax implications.

To determine which approach may be most appropriate for your business, consider the following questions:

• Is your business revenue driven more by the services you provide or the physical assets you own?
• Are there recent, comparable sales in your industry that offer meaningful market benchmarks?
• Does the business depend heavily on your personal involvement, or could it run without you?
• Are you planning to sell to an outside buyer, or transfer ownership within your family or to employees?

Keep in mind that using a combination of two or more approaches often produces a more accurate and defensible valuation than relying on any single choice.

Build the right team around you

When engaging a valuation professional, look for someone who holds a recognized credential in business valuation, has experience in your industry, adheres to accepted valuation standards, and operates without conflicts of interest.

Your financial advisor can help you identify a well-qualified valuation professional — and also serves an important role in planning your transition. With a deep understanding of your financial situation, they can help you interpret the results of a valuation in the context of your broader goals, including your retirement income needs and estate plan, and translate the findings into a concrete action plan.

Get Started: Valuation checklist

• Talk to your financial advisor about your transition goals
• Work with your advisors to determine the right valuation approach(es) for your business
• Select a qualified valuation professional
• Obtain an initial valuation
• Ask your financial advisor to help you interpret the results in the context of your financial big picture
• Identify actions to take now to impact future business value

The bottom line: start now, plan well, transition on your terms

Obtaining a valuation is not about preparing to sell. It’s about understanding where you stand so you can make better decisions, no matter how far away your transition may be.

If you haven’t yet gotten an initial valuation, now is the right time. If you have one but it’s more than a few years old, it may be worth revisiting. Business value changes, and so do your goals.

Talk to your financial advisor about where a business valuation fits into your transition plan — and what it might reveal about the future you’re working toward. The earlier that conversation happens, the more options you’ll have.

Please consult your financial professional for more information and guidance with your specific situation. For financial professionals, please contact Nuveen at 800-221-9271.