6 Factors That Could Impact The Worth of Your Company
The value of your business is likely to be affected by several of the following factors:
1- Opportunities – The opportunities to increase (maximize) a company’s profits are very important to a buyer or investor. For example by reducing costs where possible, or increasing market shares or both. The higher the opportunities, the higher the value of the company.
2- Growth Prospects – A company that has more growth potentials is what investors are looking for, therefore the better your growth prospects, the more your business is worth.
3- Uniqueness of the Business – A business that offers a rare and unique type of products or services is one that investors go after the most. Therefore the laws of supply and demand apply here meaning that the more potential buyers there are, the more the company is worth.
4- Financing Options – A buyer who pays in a three-year-installment term will pay less than a buyer who pays in a five-year-installment term because the worth of the company may be higher for the additional 2 years. So, the seller will likely factor that in the price of the business. Also, the buyer is likely to pay less if the cost of financing the purchase is prohibitive.
5- Size of the Business – A small size business carries more risks to the buyer than a larger one. The smaller the business, the higher the risks tend to be and the less a purchaser will pay. Small, owner-managed businesses are particularly risky for a new owner to take over.
6- Intangible Assets – A business that has very experienced and skilled employees, intellectual property or other special strengths will have a higher value than one that does not.
When thinking about selling your business make sure to have it appraised by a Certified Valuation Analyst (CVA) who is the expert certified to do this work.
Achille Ekeu, MBA, CVA
The Washington Valuation Group
He is a Certified Valuation Analyst and Member of the National Association of Certified Valuators and Analysts (NACVA) in the DC-MD Chapter. He is also a Management Consultant Member of the Institute of Management Consultants (IMC-USA) in the National Capital Chapter. He can be contacted by phone at 240-274-9570 or by email at firstname.lastname@example.org.