When you’ve decided to sell a business, one of the first questions you’ll have is “How much is my business worth?”
Retirement, a new business venture, a change in lifestyle or priorities – whatever the reason for selling your company -– you’re probably eager to get the sale completed ASAP in order to move onto the next phase of your life or career. Feeling keen, many company owners head straight online and use online valuation tools in an effort to get a quick answer. Such systems, however, can interpret information about the value of your business too simplistically because they don’t take all the important elements of company performance into account.
An automated valuation system will typically look at financial details such as turnover and profit – seeing only the information on the balance sheet. That valuation will be indicative and typically based upon an EBITDA multiple. But there’s so much more to your business than the numbers, right?
A holistic approach to identifying the value of your business
It didn’t take you 5 minutes to build your successful company, so it would be unwise to rely on automated tools that claim to give you a business valuation “in just 5 minutes”. These ‘robots’ only speak the language of numbers – which are just one facet of what you have to offer to potential acquirers.
In contrast, when you work with corporate finance experts (humans!), they have the capacity to think beyond the balance sheet; evaluating the whole of your business – not just the financial factors.
Here are some of the aspects that they can include in your valuation to give you a holistic idea of what your business is truly worth…
Building a successful brand takes years, so imagine how much value it will add to your business if you can offer your buyer that ready-made profile, heritage and impeccable reputation? A brand which is a recognised market leader will help that buyer break into new markets, a ‘head start’ for them that you can ask serious money for.
Loyal client base
If you’ve developed a well-managed database of customer information, you’re sitting on a treasure chest. Add in a history of outstanding customer service, repeat business, amicable working relationships and clients who double as word-of-mouth ambassadors and you’re the keeper of the keys to that treasure chest. Valuation tools simply don’t pick up on such gems – and they may even be the jewels in your crown.
Recurring and contracted revenue
Established, contracted, recurring revenue streams are a sign that the business should be able to confidently forecast sustainable growth in the years to come. Yet again, this is a very attractive feature in the eyes of a buyer but its not something an online calculator would be able to fully comprehend and relay in the valuation results you’d receive from it.
- Patented inventions and products? Tick.
- In-demand services? Tick.
- A trustworthy and reliable management team? Tick.
- Staff with specialist training? Tick.
- Expensive and well-maintained equipment? Tick.
- A strong supply chain? Tick.
Your business may have already ticked all these boxes in the space of this paragraph, but an online business valuation tool might be blind to these assets because they can’t be measured solely in numerical terms.
Even if you’ve got a strong brand, loyal and happy clients, as well as assets galore, smart acquirers could be put off by a lack of compliant and orderly documents such as contracts and leases. If you’re fastidious about keeping your paperwork in order, that could be more of a selling point (and price negotiation point) than you might think.
A corporate finance expert will not only be able to factor exit readiness into your business valuation, they’ll be able to help you tie up any pre-sale loose ends that could trip you up on the home stretch to selling your business for optimum value.
Get a business valuation with the human touch by reaching out to the friendly team of corporate finance experts at Entrepreneurs Hub. Contact us for a free, confidential, no-obligation consultation where we can help you value your business in a holistic way – one that will help you command a higher price – and assist you with the sale of your business so you can move onto your next chapter knowing that you sold it for its full worth.