- Categories: Managing the operations of your business
Many entrepreneurs do not keep track of the value of their business because they have no intention of selling their business. However, there are many reasons why an entrepreneur should know the value of his business other than determining for how much he should sell the business. There are both practical and strategic reasons why it is important to know the value of one’s business that include:
- To sell the business.
- To properly insure the business.
- To properly insure key persons in the business.
- To track business growth and shareholder value over time.
- To know the value of the shares so that in the event that investors, or partners are required, it is known what they should pay for shares in the business.
- To know the value of each director’s shareholding.
- To implement bonus plans that are based on the share price.
- To establish the annual value of shares for employee stock ownership plans [ESOPs].
- To provide a basis for Estate planning and gift planning.
- To equitably distribute business assets in the event of marital dissolution.
- To make strategic decisions based on the value of the business [project value versus business value].
- To establish the value structure of the business based on the classes of shares.
- To inform entrepreneurs of the drivers of share value for their business.
- To value intangible assets.