4 steps to obtaining a valuation on your business
As a business owner the time may come when you want to place a cash value on your company. This could be due to a number of factors:
- Looking to retire
- Wish to sell your business
- Need to access some finance personally or for the business
- Plan to grow your business
- But how do you estimate the worth of your business?
Having a value placed on your business means you can tell an investor, stakeholder, buyer or banker what you believe the business is worth so that if they want a percentage of it they will know how much they would need to pay.
Cash is king in the business world so you will need to demonstrate to an investor how you arrived at your valuation, in order for them to determine what a reasonable investment would be.
Make sure that your valuation is done properly otherwise you may encounter issues later down the line which may result in a damaged reputation.
1) Don’t confuse asset value with business value
It’s not what your business is worth; it is how much cash is tied up in your business. A buyer isn’t interested in how much money they can make if they sell your premises; they are interested in how much money they can pull in through the products and services produced there.
2) Consider what makes your company valuable
A valuation of your company is all about the money you are making and the money you are likely to make in the future. A buyer wants to know what sort of money they can expect to be making if they take over your company.
To work out profitability, you need to be aware of your gross income and all outgoing payments, including payroll, even your own salary. Ensure you provide complete and accurate figures.
3) Valuation is merely a guide price
By adopting best practices and utilising proper techniques, you will create a valuation which you can present to investors and buyers, providing them with a reasonable and respectable answer to the question of “What is your business worth?” However, that does not mean your business is actually worth the value you’ve put on it. In the end, your business is only worth exactly what the market says it is worth!
4) 8 factors that will drive your business value
We believe there are eight factors that will drive your business value. Considering each factor will help you to focus on what areas need attention in order for you to improve your business value:
1 Financial performance
2 Growth potential
3 Switzerland structure
4 Valuation see-saw
5 Recurring revenue
6 Your USP
7 Customer/client satisfaction
8 Hub and spoke
For more information click here and take our free 13 minute free survey and we will give you a cat-scan analysis of your business which will give you insights on:
- Building your business into a valuable saleable asset that can run without you
- Steps to reduce the number of hours you are involved in the business while simultaneously boosting your profits
- How to get more freedom and profits out of your business in the short term and build an asset that you can pass on in the long term
Alternatively if you would like more information on exit planning, contact me and I will invite you to my next Freedom Seminar which will be taking place in South Yorkshire soon!