Plan to Sell or Plan to Fail:

Why Knowing Your Business's Worth is Crucial

by Drew Whelchel

Are you "planning to sell or planning to fail?" This might sound intense, but it’s a hard truth every business owner should embrace. If you’re not actively structuring your business with an eye on maximizing its future value, you’re setting yourself up for disappointment down the road. Knowing what your business is worth isn’t just about selling—it’s about smart planning and securing long-term success. This is especially important when considering the Four Big D's that often lead to business sales: Death, Divorce, Disability, and Disagreement.

Why Knowing Your Business’s Worth Matters

Running a business without understanding its value is like riding in a saddle blindfolded. Knowing your business's worth helps you make informed decisions, whether you’re thinking about expanding, diversifying, or planning an exit strategy. It’s all about having the right information at your fingertips.

Structuring for Future Success

How are you keeping your financial records? Are you building a solid management team, diversifying your income streams, and enhancing your market position? Ideally, you want to build the business so it can run without you. These steps not only boost your business’s value but also make it a magnet for potential buyers or investors.

The Power of a Strong Negotiating Position

Knowing your business’s true value gives you serious leverage in negotiations. Whether you’re selling, bringing in investors, or securing a loan, a well-evaluated business shows that you know what you are doing. This boosts confidence and can lead to better deals.

Spotting Areas for Improvement

How will you know the strengths and weaknesses so you can make improvements? Do you need to fine-tune your inventory management, boost customer relations, or streamline operations? Knowing where you stand helps you make impactful changes.

Planning for the Future

Overcome the Four D’s with succession planning, retirement planning, and crafting a smart exit strategy. Knowing your business’s value helps you decide when and how to transition, ensuring you get the best return on your hard work and investment.

Peace of Mind and Confidence

Knowing what your business is worth gives you peace of mind. It reassures you about your business’s market standing and prepares you for future opportunities and challenges. This confidence can also boost the trust of your employees, stakeholders, and potential investors.

Implementing Regular Valuations

Regular business evaluations (once a year) should become a routine part of your management process. This ongoing practice keeps you informed about your business’s financial health and helps you identify trends or issues before they become major problems. It’s a proactive approach that can save you time, money, and stress in the long run.

The Role of a Business Broker

Engaging with a professional business broker can greatly simplify the evaluation process. Brokers bring a wealth of experience and can provide an objective, comprehensive view of your business’s worth. They can also offer valuable advice on how to increase your business’s value and prepare it for a successful future exit.