Most business owners don’t consider the importance of knowing their company's value until they’re preparing to sell. Unfortunately, this mindset often leads to missed opportunities for growth and long-term success.

A business valuation isn’t just a tool for selling your company—it’s a powerful resource for understanding where you stand today, identifying risks, and unlocking your business’s full potential.

Consider this: According to UBS Research, 75% of business owners planning to sell believe they could do so in a year or less. However, the reality paints a different picture. According to research, 58% of business owners have never had their business appraised, and 48% have no formal exit strategy in place. This is a critical blind spot that can easily be fixed. And, in the process of valuing your business, you can learn a lot about what would make your business more valuable.

Let’s explore three critical insights you can gain from a business valuation and how they can help you drive growth, reduce risks, and find new opportunities to elevate your business.

1. How to Set the Right Goals

Many businesses struggle to establish meaningful growth goals. They either use the “ruler method,” simply projecting growth based on the past three years, or the “spaghetti method,” where they throw goals against the wall and hope something sticks. These approaches often lead to goals that employees don’t believe in or take seriously.

A business valuation changes this dynamic by providing two critical data points:

• What your business is worth today

• What your business could be worth if it performed like the best-in-class companies in your industry

Armed with this information, you can set realistic, data-driven goals for increasing valuation, revenue, and profitability. Rather than guessing or hoping, you’re working with a clear roadmap for growth that inspires confidence across your team.

2. Where to Reduce Risks

Every business faces risks, but not all risks are immediately visible. Buyers of businesses typically discount their offers based on perceived risks, so understanding your company’s valuation can shine a light on the vulnerabilities that could hurt its value.

Common risks include:

• Over-dependence on the owner or key team members

• Over-reliance on a single customer or supplier

• Unprotected intellectual property

• Legal or compliance risks

• Weak financial controls

A business valuation helps you identify and prioritize these risks, ensuring that critical vulnerabilities are addressed. By focusing on mitigating these risks, you not only make your business more attractive to potential buyers but also strengthen its stability and long-term success.

3. Where to Find Low-Hanging Fruit

Every business owner and leadership team has a long list of ideas for driving growth, but prioritizing those ideas can be challenging. How do you decide where to invest your time, money, and resources for the greatest return?

The process of completing a business valuation provides clarity. During the valuation, a Value Creation Guide will ask you questions about your business’s readiness to sell and its attractiveness to potential buyers. These questions often reveal areas of low-hanging fruit—simple, high-impact changes you can make to improve your company’s value.

For businesses using systems like EOS® (Entrepreneurial Operating System), a valuation can help leadership teams decide which “rocks” to pursue. By scoring potential initiatives based on how much value they will add to the business, you can focus on the actions that will drive the most significant results.

When Is the Right Time to Value Your Business?

The best time to value your business is now. If your company generates more than $5 million in revenue, understanding its valuation can provide critical insights into its current worth and growth potential.

A valuation not only tells you what your business is worth today but also gives you a realistic target for the future by showing you how top-performing companies in your industry are valued. Along the way, you’ll gain a clear understanding of the risks that need to be addressed and the opportunities you can seize to maximize your company’s value.

Ready to Unlock the True Potential of Your Business?

A business valuation isn’t just a one-time exercise—it’s an ongoing tool for growth, risk management, and strategic decision-making. Whether you’re planning to sell in the future or simply want to strengthen your business today, understanding your valuation is the first step.

Take control of your business’s future and set yourself up for success. Start your business valuation journey today by visiting Value Creation Engines. Let us help you uncover actionable insights to reduce risks, drive growth, and maximize your company’s value.

Originally published on Darrell Amy's LinkedIn.