Business Valuations: How to Increase Your Business’s Worth

11.10.2025 | Category: Business Resources

Estimated read time: ~6 minutes

Summary: Business valuation involves assessing assets, liabilities and other elements of a business to determine its worth. In this guide, learn how to improve your company’s value, which is especially important if you are planning to sell the business. Discover practical advice on how your business valuation affects your retirement planning.

You have worked hard to make your business what it is today. Now, you’re considering how to exit your business, perhaps through retirement or by selling it to pursue other interests.

It’s time to understand what your company’s worth with a business valuation and take steps to increase and protect its value. A business valuation is usually conducted before a company merges with or is sold in parts or as a whole to another company. Let’s break down each aspect of business valuation here.

How to value a business

If you’ve never had your business valued before, don’t worry. It’s more straightforward than it sounds. Here’s a step-by-step look at how the process usually works.

1. Review financial statements

Start by organizing your finances. That means making sure your income statements, balance sheets and cash flow reports are up to date and accurate. Clean, organized records make the entire process smoother and help ensure your valuation reflects your business’s true potential.

2. Choose the right valuation method

There’s more than one way to value a business, depending on what you want to learn. Here are the three most common business valuation methods:

Market-based valuation: This process compares your business to similar ones that have been sold. Factors like industry trends, customer base and location can affect the value of your business.
Income-based valuation: This approach helps you understand future earning potential with steady, recurring revenue streams. This method is generally valued more highly than one-time sales.
Asset-based valuation: With this process, you calculate the value of what you own minus what you owe. Works best for asset-heavy businesses; service-based companies often gain value from relationships, systems and brand reputation.

3. Work with a valuation expert

Each valuation method serves different purposes and offers unique insights into your company’s financial health. That’s why it’s a good idea to work with a qualified, unbiased financial professional who can help ensure your valuation is accurate and aligned with your financial goals. Plus, their reports usually hold more weight, whether you’re selling, negotiating or making long-term plans.

Increasing and protecting the value of your business

A big part of understanding your business’s value is knowing how it stacks up against others in your space. You can work with a professional to review recent sales of companies in your space and industry trends to give you a clearer picture of where you stand. Armed with this information, you can make informed decisions on how to increase the value of your business to prepare for an exit. Here are a few things to consider:

1. Identify growth opportunities and risks

A good valuation doesn’t stop at the numbers. It shows you where to improve and what to protect. Common growth opportunities include:

Expanding recurring or renewing revenue streams
Diversifying products or services
Improving customer retention
Reducing operational costs through vendor reviews and process improvements

Likewise, valuations can flag risks such as:

Heavy reliance on the owner or a single key employee
Overdependence on a few customers
Lack of succession or exit planning

Addressing these risks early can make your business more resilient and attractive to future buyers or investors.

2. Reduce your expenses

Look closely at your books, ideally with help from your accountant, to find areas where you can operate more efficiently.

Review contracts and vendors annually to see if you can negotiate better rates.
Check your insurance coverage to ensure you’re getting the best protection for the right price.
Streamline inventory management to reduce waste and improve cash flow.

Lower operating costs mean higher profit margins, which often translate directly into a higher business value.

3. Build a stable cash flow

Getting a stable and predictable cash flow is crucial for boosting your business’s value. While it might sound simple, it’s one of the most effective ways to attract potential buyers. They prioritize knowing how much cash your business brings in, as it’s a key indicator of the company’s health.

To build a stable cash flow, consider:

Diversifying income sources and implementing efficient payment processes.
Nurturing strong customer relationships
Planning for seasonal changes
Negotiating flexible payment terms with suppliers.

4. Delegate key responsibilities, and empower your team

Strengthen your business by delegating key responsibilities, documenting processes, and empowering your team to take ownership of essential functions, making it more sustainable and attractive to potential buyers. Review your employee benefits plan to make sure it aligns with your employee retention strategy. Finally, consider key person life insurance on a key person in your organization to help protect your business if the key person dies.

5. Consider a buy-sell agreement

A buy-sell agreement is recommended when there are multiple business owners beyond a married couple. This agreement outlines how ownership is transferred in cases of death, long-term disability, or an owner’s exit.

Because transfers can be costly, buy-sell agreements are often supported by life insurance policies to ensure that the potential value of ownership is secured for you or your loved ones. If a buy-sell agreement is in place, it’s wise to review its funding method and consider life insurance to provide the necessary funds at the right time.

6. Create a retirement plan

If selling the business is the primary retirement plan for you, it’s important to ensure the sale will generate enough income to sustain you throughout retirement. That means evaluating the business value carefully to ensure it meets your retirement needs. If your business lacks a retirement plan, consider supplementing it with cash value life insurance to build tax-advantaged cash outside the business. This approach offers financial flexibility and security for your future.

Ready to build a stronger business?

According to the Exit Planning Institute’s Readiness Survey, 75% of business owners “profoundly regretted” selling their businesses 12 months after finalizing the deal.¹ Planning for the sale of your business and what comes after is the best way to reduce your chances of experiencing seller’s remorse.

Even if you are years away from stepping back, now’s the time to optimize your business’ value. The earlier you begin, the more control you have over the outcome. Remember, a financial professional can help you explore other strategies, such as insurance coverage evaluation, tax planning, succession and exit planning, estate and legacy options, and retirement planning.

Mutual of Omaha’s financial professionals can help you build a personalized strategy that protects what matters most: your business, your legacy and your peace of mind. Contact us today.

Frequently Asked Questions (FAQs)

What factors affect the valuation of a business?

A few key factors that can affect business valuations include profitability, the value of your assets, current market trends, the level of risk in your industry and the strength of your customer base.

Is disability insurance helpful for business owners on the verge of retirement?

If a business owner cannot work because of a disability, this insurance will provide a portion of their income, ensuring financial stability during recovery. Disability insurance can cover your personal needs while you await the sale of your business.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

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