Do Standard Valuation Tools Work?
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…
Brand currency
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.
Assets
- Patented inventions and products? ✅
- In-demand services? ✅
- A trustworthy and reliable management team? ✅
- Staff with specialist training? ✅
- Expensive and well-maintained equipment? ✅
- A strong supply chain? ✅
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.
Exit readiness
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.
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FAQs – Selling your company
How do I sell my business?
At Entrepreneurs Hub, we talk about five key areas that make the difference between success and failure when selling your business. Read more…
How much can I sell my business for?
Determining your business’s value is more than just calculating a number it’s complex with key factors, that said the basic equation is actually quite simple. Read more…
How long does it take to sell my business?
The timeline varies depending on the complexity of the deal and how ready the business is for sale. On average, the process takes around twelve months – sometimes less, sometimes more.
While preparing your business for sale, Entrepreneurs Hub conducts in-depth research to identify potential acquirers. You’ll have the opportunity to review and approve this list before we make any approaches. Once the business is fully prepared – often the most time-consuming step, we begin marketing it. Typically, you’ll start seeing initial interest within a few months, with follow-up meetings happening shortly after.
As these meetings progress – coordinated and facilitated by Entrepreneurs Hub, you’ll begin receiving initial offers. At this stage, we’ll help you assess the strategic fit between your business and potential buyers. When you decide to move forward with an offer, an exclusivity period begins, during which the acquirer conducts Due Diligence (DD).
The DD phase typically lasts two to three months, depending on the complexity of your business. Once complete, the sale is finalised, and you’ve successfully sold your company.
How do I sell my business quickly?
Selling a business quickly is possible, but speed shouldn’t come at the expense of value or deal security Read more…
When is the best time to sell?
Selling your business is a major milestone, and the start of an exciting new chapter, whether that means new ventures or a well-earned retirement.
In our experience, the best time to sell is when you don’t need to – when your business is performing well – not necessarily tied to the calendar. That said, timing can still play a role.
Timing the Market
Strong economic conditions, sector growth, and buyer confidence boost valuations. Don’t wait for a “perfect” market – a well-prepared, well-performing business sells in any climate.
Plan Ahead (12–18 Months)
The best outcomes come from early planning: clean financials, solid forecasting and growth potential.
Spring & Autumn Are Active Periods
The M&A market is typically busier in spring and autumn while summer and winter tend to be slower due to holidays and year-end distractions. However, the unpredictability of deals and negotiations makes this hard to target. We do deals all throughout the year – the key is to work with someone who can keep driving the deal forward whenever it happens.
Financial Year- End
Selling your business well is a long process and aiming for your financial year-end milestone is a virtually impossible task. But it is worth bearing your financial year in mind as buyers will want to review the most up-to-date accounts available.
The best time to sell is when your business is ready, and you are too. With the right preparation and positioning the right timing follows naturally.
Can I sell my business online?
Yes, you absolutely can sell a business online. Many platforms specialise in connecting business sellers with buyers. Read more…