Business Valuation - What Determine the Value of your Business?

Business Valuation

business valuation

What Determines the Value of Your Business?
Do you want to sell business at optimal profit? Of course you do. The first thing you will have to do is business valuation. You will need an expert for this. A valuation expert is the person who will tell you how much your business is worth and what you can do to increase its value. To learn how to increase the value of your company, you need to know where its value comes from.

Profit generation
In business valuation, the valuator will pay special attention to the profits your firm is making. The more profitable the company is, the more valuable it will be. Profitable businesses are more attractive to buyers. This is because buyers want to buy a business that has already established itself in the market and one that promises the most returns. To increase your profits, you must reach out to your target market.

Market share
It is not easy to gain a market share but when you do, the value of your business will certainly flourish. A business valuation expert will look at the market share of your company. How do buyers respond to your brand? To gain a market share, you will need to do everything possible to attract clients and win their trust. You will achieve this by investing in ingenious sales and marketing strategies that will lure new business to you. This takes both time and money.

Intellectual property
As you do your own business valuation, do not forget about your intellectual property. Your intellectual property has a huge impact on the value of your business. Some of the areas you will have to focus on are trademarks, patents as well as inventions. All these assets are of interest to prospective buyers.

Brand and reputation
Your brand and reputation makes up the goodwill. If your company has a good reputation, then customers will have no problem transacting with you. Brand recognition will, further, add value to your business. With that in mind, then you know the best way to increase the value of your business is to work on your reputation.

Customer list and key clients
In business valuation, buyers will also be interested in your customer lists. There may be one buyer that the buyer wants to get into his books. If this is the case, you will be able to command a better deal when you sell business. Additionally, if you have won contracts that your competitors pitched for, you might not have any trouble finding a new buyer.  

Products and services
The type of products and services you offer will affect the value of your business. If your products are on high demand and people cannot do without them, then the results of your business valuation will be quite impressive.

Other areas considered in business valuation include:

  • List of your suppliers
  • Competence of your employees
  • Location of your business

Getting a regular business valuation is a recommended practice. It will help you know the worth of your business and also help you know what you can do to increase that value.