5 Factors that will Impact the Value of Your Business
At Entrepreneurs Hub, many business owners will ask what will impact the value of their business.
Of course, there are numerous things that make your business attractive to a buyer. You may fit in with their needs for expansion, for instance, or there could be greater potential for growth or the chance to combine two different businesses for strategic reasons.
Whatever the reason for buying, here’s our quick look at 5 factors that could well impact the value you achieve.
- Consistent Good Performance
A potential buyer will want to know that your business has performed well over the last three to five years. They’ll want to take a look at the balance sheets and see a demonstration that profits are on the rise rather than starting to fall. Strong performance is key if you are going to attract the right kinds of buyers and get a good price.
- The Potential for Growth
No one wants to buy a business that is going to remain static. While you may have not taken your company as far forward as you wanted, if there is the potential for growth then you are going to look a lot more attractive to buyers. While in many cases this will boost the asking price, it’s not always the case.
That’s because it may require more investment on the part of the buyer and this financial aspect alone may well be a determining factor when a bid is put in. It’s much like buying a house that needs a lot of work completing on the infrastructure.
- Your Customer Base
How many loyal customers you have managed to pick up and whether these are likely to stay when the company changes hands is another issue that can affect the price. A healthy, evenly spread customer base that brings in a steady revenue is a good place to start and combined with the potential for good growth can give buyers a strong platform on which to develop.
One aspect of the customer base that can be problematic is if you have just a few top customers who contribute a large proportion of the revenue. This can present a potential risk that can reduce the value of your company. If 80% of your income is coming from just two or three major customers, then the question a buyer will ask is what happens if they suddenly bail out.
- The Influence of You
How much the running of the company depends on you personally as the owner is also another important factor. Most don’t tend to hang around when a company is sold and that can impact on the value. Essentially, the less dependent your business is on you, the higher you should expect the valuation.
Another side point to this is that if some of your top customers are only doing business because you own the company, they might well want to shop around once you leave. That may be a risk a potential buyer doesn’t want to take on.
- A Well-Prepared Business
If you are serious about selling your business at some point in the future make sure you and your business are well prepared for the process. If you were buying a car you want to make sure it’s well serviced, valeted and no nasties under the bonnet, it’s no different with a business. At Entrepreneurs Hub we believe this is key to achieving a premium valuation; and ensuring your deal completes quickly.
Of course, there are many other factors that affect the value of your business. These five points are crucial though when you are considering preparing to sell – understanding them means you can put in the processes and changes that are more likely to make your business an appealing asset and improve the price you get for it.
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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…