Whatever your plans were for 2020, it’s a safe bet that COVID-19 changed them. Its physical and economic impact has been felt literally around the world, and it will continue to have a ripple effect on businesses for months and years to come.
Harry and David revolutionized the way things were done in their industry. When they came on the scene, no one had ever seen anything quite like the world they created. In their first year alone, they moved over a million units, received numerous awards, and were number one in their market.
Harry, however, could never seem to get what he was after…which is exactly the way David designed it. No matter how hard he tried to succeed, David made Harry’s life difficult at every turn. It almost seemed like David wanted him to die! In spite of their differences, however, they had a very profitable business relationship for nearly 30 years.
Knowing your business’s value not only helps alleviate fears of not understanding what’s really going on with your business, but it also helps you determine when it’s time to make changes in your staff, infrastructure, or products.
An important component of knowing your business’s value is understanding the potential valuation multiple. A valuation multiple is a financial measurement tool that determines a business’s value by multiplying the Company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) by a multiple observed from sales of similar companies.
We recently posted an article about Estate Taxes and how the value of your company affects how much your heirs may have to pay. We pointed out the benefit of having your business properly valued so your heirs know exactly what to expect regarding the value of your estate. We also briefly touched on the idea of transferring portions of your company ownership during your lifetime in order to lessen future tax burdens.
In our previous post, we began a discussion on the impact your company’s employees can have on the value of your business. Whenever you decide to sell, you’ll want to understand the role your team plays in the final price you get.