There are several factors that might come into play when determining your business’s value, with various factors at play. Last week, we delved into valuation methods; today, let’s unravel the pivotal elements shaping your business’s worth:
Structure
Can the business function effectively without you? If you find it needs your constant attention to remain profitable, you may need to look at ways of streamlining, automating or delegating work.
Circumstances
If you’re under pressure to sell quickly – for instance, because you need to pay off creditors or you want to retire due to ill-health – the price may be lower than if you have time to achieve a better deal.
Financial record
Detailed, accurate records that show a sustained history of strong financial performance will work in your favour when your business is being valued.
Reputation and customers
Is your business well-known within your field, and do people have a positive impression of the quality of your product or service? Similarly, do you have a solid base of returning customers who trust your brand? How profitable are they?
Staff
The skills and experience of your staff can often be a major part of your business’s value. A loyal team of people who work well together may mean a higher value – but remember to consider how much of that depends on your leadership.
Intellectual property
What’s the value of any trademarks, copyrights, or patents that your business owns? Do you have secret recipes, for example, or innovative designs for your products?
Product or service
A high-quality product or service can mean a higher-value business. This should consider how niche your product is, and how it compares to competitors.
Age of the business
Businesses in their early stages may have a lot of potential, but they’ll often make losses. More established businesses tend to be profit-making and face fewer risks.
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