Business Broker San Diego - Factors that Determine the Value of a Business

The first thing a business broker San Diego will do when you hire him is determine the fair market value of your business. This is done by performing a business valuation. The valuation report is what will help determine the best selling price. If you want to sell your business for maximum profit, you have to familiarize yourself with the factors that affect the value of your business. In this post we shall be looking at the main factors.

Net income

The first thing is the financial health of your business. This is the area business brokers San Diego focus on the most. When selling your business, buyers will want to see your financial records for the last three years. They consider a range of things including cash flow, net income, EBTIDA and other things.

Industry

The industry your business is in will also have a part to play. If you are in a failing industry buyers will not be interested in your type of business. Growing industries, on the other hand, are more attractive and will make your business more valuable. This is why it is important to time the sale of your business carefully.

Size of business

A large and more profitable business has higher multiple of price to earnings. This means larger businesses that are successful are more valuable than small businesses that are successful. Don’t be shocked if your business broker San Diego advises you to hold back the sale until your business attains a certain level of growth. The main reason for this is because most small, successful businesses are dependent on a handful of products or one or two major clients. The risk of the business going under is thus very high.

Company reputation

The reputation that a business has will also affect its value. This is mostly because reputation will significantly affect goodwill. Pending lawsuits, for example, will make your business unattractive to buyers. Yes the business can be sold but buyers will bargain for the lowest possible price in order for the purchase to make sense.

Other things that will affect the value of your business and are worth mentioning include employee skills, customer concentration, recurring revenue, contracts and agreements. Business brokers San Diego have sold many businesses before yours. They will thus be able to put in the effort needed to not only help you sell fast but for maximum profit. The most important thing you should do when selling a business is to hire the most competent business broker in the business.

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