Precise Future Planning - Business Valuation Part 3
Previously in our series, we learned that an early business valuation provides us with an evaluation of the business as it currently stands. This brings us to our next benefit; more precise future planning. We can use the business valuation as a ‘road map’ for increasing the value of the organization. Business owners and managers gain a comprehensive look at the business and can then regroup and strategize by clarifying fertile areas for future expansion.
Let’s jump into how this plays out using our example of Mr. & Mrs. Garcia’s storage and distribution warehouse from last week.
Mr. & Mrs. Garcia have received their business valuation and now have a snapshot for their business as it currently stands. They want to expand their business by purchasing the facility next to theirs, but also want to maximize their business as it currently stands. Using the business valuation, they brainstorm what will add the greatest value to the business; human capital, product related improvements, process improvements, expansion of services offered, or expansion of the facility itself. By having the valuation, they are able to use it as a strategic tool for making more informed and smarter decisions in future company investment, expansion and development.
Their business valuation showed that although the location of the warehouse is great, there are still empty lots, the type of inventory that can be stored is limited to non-perishable goods, there are no formal procedures for where trucks enter, exit, load and unload, as well as the new concern of the facility not being energy efficient and therefore adding to the total cost of the building. With this in mind, Mr. and Mrs. Garcia create a plan that will add value by improving the facility and implementing some process and procedure enhancements before they decide to expand.
We’ll discuss how these changes impact the valuation of the business in the next blog of the series. For now, what the business valuation does for Mr. and Mrs. Garcia in regards to future planning is by using the comprehensive look at both short-term and long-term planning, they are able to regroup and strategize for future success. The Garcias’ develop plans on how to improve their business by expanding the services they currently have in the short-term as well as how to expand the business itself in the long term (M&A).
In my opinion, the best benefit of an early business valuation is the more precise future planning that can be done. After all, how do we make plans for the long term future and exit stage, when we don’t even know how much the business is even worth?
If you want to go over valuing your business as well as other future long-term strategies such as Intellectual Property protection, Process & Procedures refinement, and Estate Planning, then please don’t hesitate to connect with us here and schedule a free consultation.
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