Valuations in Small Companies: Why They're Important & How to Increase the Value of Your Business

Valuations in Small Companies: Why They're Important & How to Increase the Value of Your Business

To sell your small business, there are some very crucial steps to take before the listing. For one, it is very important to understand your business’s value in the marketplace.  Obtaining a valuation allows you to thoroughly understand a business’s financials and their value in the marketplace, and give you an understanding of the price at which you should list your business for sale. Before that decision is made, a BOV can give you an inside look at what is working and what might not be.

Imagine having the opportunity to determine what makes your business most profitable and what might be leaking money. Once you evaluate the nitty-gritty details of your finances, you can make some efficient decisions – decisions that could make you money in the long run. That said, what are some ways you can increase the value of your business?

Above all else, experts will argue that predictability and uniqueness are the two main factors in making your business more valuable than the competition. Beyond that, there is recurring revenue, growth (above industry average), location, diversity, organized financials, and goodwill.

This list includes both tangible and intangible assets, which is important to understand. A profitable business is not simply one that can sell a lot of products. Sure, that is valuable. However, what keeps the lights on week after week? Returning customers. A successful brand is one that someone not only returns to but tells all of their loved ones about. Again, what would make them come back? A unique, one-of-a-kind experience. If you can set your company apart, be it through your products or customer service, its value will inevitably increase.

Once you are ready to sell, it is time to organize your financials and perform that business valuation again. Doing this, you can determine your sale price. The greatest benefit of understanding what your business is worth is ensuring you are negotiating with potential buyers who are not going to low-ball you. The right buyer will be able to meet you where you are most comfortable selling.

When in doubt, hire a business broker. Actually, even if you feel confident, hire a business broker. An extra set of eyes, hands, and expertise never hurt anyone. Selling a business is no small thing. Allow someone with years of invaluable experience to guide you through the process. Transworld Business Advisors not only has these professionals, but we also perform business valuationsContact us today!