What Is Your Business Worth? 3 Ways to Make Your Company More Valuable
What determines the true market value of your business?
Possibly, you have heard about “rules of thumb” and presume that your business will be worth approximately what a similar size company in your industry is worth.
But, it isn't that easy.
There's what your business is worth today to you.
What it's worth to a prospective buyer, now or in the future.
And, there's what it could be worth with a bit of proactive planning.
There are at least eight factors that drive your business value, and each of them is potentially more important than the industry you are in.
Would you like to know what your business is worth? What's more, what it could be worth with a small amount of effort and investment? Business brokers have a variety of methods to determine value. We utilize a number of them. In particular, we process business data through sophisticated proprietary algorithms - a SWOT system used by over 50,000 businesses worldwide. Another is a detailed category-by-category analysis of your business tax returns for the past three years. Some brokers will provide those services for you without charge or obligation.
Want to grow your business value? Here are three of the most important secrets to building business value:
1. Cultivate Your Differentiation from the Pack—Develop Your Unique Selling Proposition
People don't acquire what they could easily build themselves. If favorably low prices are your chief competitive advantage, a prospective business purchaser could conclude that they can merely open up as a competitor and win over your customers with introductory discounts for far less cost than buying you out. You need to develop a unique connection to the market, or an expertise in serving your customers, or a proprietary product or way of doing business, or a technological or logistical advantage, or a team of exceptionally competent employees—one or more exceptional attributes that make buying your business far more attractive than trying to compete with it.
2. Generate Recurring Revenue
A key factor in any business purchase decision is the buyer’s assessment of how the business will perform after they buy it. There is nothing more comforting and reassuring than recurring or “automatic” streams of income from such things as subscriptions, service contracts, or monthly, seasonal, or annual renewals. Almost any company can structure itself so that at least some of its revenue is recurring; and, the more "automatic" income there is, the more valuable the business will be.
3. Build Customer & Market Diversification
Reliance on one or just a few customers for the continued prosperity of your business is extremely precarious and raises an immediate and urgent “red flag” for potential buyers. The most valuable and sustainable businesses have many customers, each representing a small fraction of total sales, rather than one or a few large accounts providing a significant percentage of the revenue. Most potential acquirers will either walk away or greatly devalue your business if any one of your customers represents on average more than 15% of your sales.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Peter Siegel MBA, BizBen Founder, ProBuy, ProSell, ProIntermediary Programs
Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.
|Mike Nova, Business Broker: North Bay Restaurant, Retail Specialist
I have over 30 years of direct restaurant industry experience, including my personal experience as a restaurant owner. For the last 7 years I have worked as a Broker specializing in this challenging and ever changing field of restaurant and bar sales. Contact me at 510-708-6682 Cell.
|AJ Rana - Business Broker, San Francisco Bay Area
Professionals who understand the importance of world class business brokerage service and the value it can create. Specializing in assisting sellers and buyers with retail stores, restaurants, hospitality & lodging, manufacturing operations, distribution companies, e-commerce and service businesses.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.
|Mike Brewer: Liquor License Broker, ABC Consulting Service
Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.
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