Small Business Owners Off by 60% When Estimating Company Value, Says Study

Good Grasp on Value Enables Better Tax & Retirement Planning, Reduces Conflicts

The Washington Post’s On Small Business blog cites data from a variety of sources that indicate most small business owners don’t have a good grasp on the value of their business.  Written by Gerald Radican, the piece on the Post blog cites these findings from Spardata, a Maryland-based valuation firm:

A typical business owner misjudges the value of his or her company by 59 percent. That’s because business owners often choose to estimate the value based on what other businesses in the same industry are valued. Such rationale assumes one business is identical to every other business in an industry, when in reality nothing could be further from the truth.

Radican adds that data from MassMutual reinforces the Spardata findings:

According to the MassMutual Business Owner Perspective Study: 2011 Insights in an Uncertain Economy, conducted by GfK Custom Research North America in 2011 for Massachusetts Mutual Life Insurance Company, four in 10 business owners felt that it was “extremely or very important” to know what their business is worth, and nearly six in 10 say they’ve had a business valuation done in the past three years. The problem is that one-quarter of those who claim to have done a business valuation did it on their own.

What’s the best course of action for owners?   To get help of a credentialed valuation provider—such as a Certified Valuation Analyst (CVA), of course!   Read the whole thing.

Qualified valuation advisers help small business owners in substantial ways, the data shows