Why Is Knowing Your Business Value So Important?
Content Provided by Federated Insurance
Understanding the value of your business is essential for strategic planning, decision-making, and business succession. Yet, a recent survey found that 98% of businesses didn’t know the value of their companies.1
The Benefits of Common Valuation Methods
Knowing your business’ value can help in several ways. It allows you to prepare for the future, helps ensure fair business value, and can prevent potential disputes and conflicts. However, getting a formal valuation can be expensive and time-consuming. Instead, it might be worth considering common approaches to calculating value, such as:
- Book Value: Looks at net worth based on assets and liabilities
- Adjusted Book Value: Incorporates current market values into the equation
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Focuses on your business’ profitability
- Sales Multiplier: Compares your revenue to similar businesses
- Asset-Based Valuation: Considers both tangible and intangible assets
- Market Comparisons: Shows comparisons to how similar businesses are valued
A Smart Way to Estimate Value
Federated Insurance® offers a solution: the Value EstimatorSM tool. This helps to estimate your business’ worth without the high cost or time commitment of formal valuations. Using three to five years of financial data, the tool applies multiple value methods to provide an informal estimate. This can help provide financial insights to help make informed decisions for your business’ future.
To learn more about the importance of business valuation, and how the Value Estimator tool can help you, talk to your Federated Insurance marketing representative for a referral from Federated’s network of independent business succession and estate planning attorneys.
1. CNBC. Most Small Business Owners Don’t Do the Math on Their Most Valuable Assets. https://shorturl.at/tUi7d Accessed 3/17/25.
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This article is for general information and risk prevention only and should not be considered another other offer of insurance or legal, financial, tax, or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all losses. The information herein may be subject to, and is not a substitute for, any laws or regulations that may apply. This information is current as of its publication date and is subject to change. Some of the services referenced herein are provided by third parties wholly independent of Federated. Federated provides access to these services with the understanding that neither Federated nor its employees provide legal or other expert advice. All products and services not available in all states. Qualified counsel should be sought with questions specific to your circumstances. All rights reserved.
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