6 Drivers of Business Value

What's the first question to ask before deciding to sell your business? For many, it's "what is my business worth?" In fact, a proper valuation is one of the most important steps to take before putting a business on the market. However, you shouldn't wait for selling time before asking yourself this question. To make your business worthwhile to a buyer, you should be taking steps to boost your business's value long before you decide to step away. Not sure where to start? You're in luck. Follow along to learn what factors drive the most successful businesses.

Investors and operators buy businesses every day. It is an intricate process with many procedural steps, but if done intelligently, can be very profitable. Fortune 500 companies don't happen overnight, but with hard work and perseverance, you can find success in your industry. Buying an existing business may have more upfront costs but, in most cases, is a less risky venture. Taking an existing business and fine-tuning the operations will lead to a more successful acquisition.

Getting The "A" Price 

Did you know that only 20% of listed businesses sell each year, leaving the other 80% unsold? Buyers are out there, but they are looking for specific characteristics when researching investment opportunities. An "A" company will sell faster and for more money. Below is a list of criteria needed to make the "A" sale.

The short answer is absolutely YES! The basic reasons, good and bad, for seller financing have not changed, but the urgency and need for this has become much more important now during the Covid pandemic in order to get an ownership transition accomplished.

There are many reasons seller financing is far more advantageous than not during these pandemic times. Let's review some of those reasons both PRO and CON:

Your dream was always to be your own boss and run things yourself. You had the self-confidence, resources, ideas and passion for this activity and the support you needed from your family to do this. Retirement or an exit from the business was really never in the forefront of your planning thoughts, so you went about your daily, monthly and annual duties as if "trees grow continually to the sky"!

Success followed you throughout the typical ups and downs of an entrepreneurial venture and you had a good time and made a living you and your family could be proud of. Over the years many changes occurred that held your interest. You maintained the business growth on a reasonable basis and lo and behold you have paid all the debts, possibly acquired the real estate that housed your activity, but in the "effort and grind" of daily activities you did not take into account what could happen to all of this. After all your best friend was in the business with you and yes you had both agreed to a buy out plan, had it drawn up at the beginning and even had insurance to help pay for it all. Only one thing you neglected to do and that was to sign and execute the document.

• Did you ever consider developing an in-depth exit strategy plan?
• Did you ever consider that competition might be gaining on you and you were unaware of the consequences?
• What else could possibly go wrong with you having such a strong business in a strong marketplace?

THE 4 D's should be considered as all are out of your control but any one of them can and will bring a good business to its knees. 

 The initial response to the question in the title really should be: "Why do you want to know the value of your business?" This response is not intended to be flippant, but is a question that really needs to be answered.

• Does an owner need to know for estate purposes?
• Does the bank want to know for lending purposes?
• Is the owner entertaining bringing in a partner or partners?
• Is the owner thinking of selling?
• Is a divorce or partnership dispute occurring?
• Is a valuation needed for a buy-sell agreement?

There are many other reasons why knowing the value of the business may be important.