Factors that Influence the Value of a Business

Business brokers Orange County consider a number of things before setting a selling price for a business. Unlike the valuation experts who only consider textbook formulas, business brokers go further to give a business valuation report that is more accurate. If you are thinking about getting your business valued, it pays to understand the factors that influence the value. Here are the main factors that will affect the value of your business.

Type of business
Buyers prefer franchise businesses than the non-franchised operations. This is because the franchise businesses have a successful formula, franchise manuals and franchisors will offer continued support and advice. A business broker Orange County will tell you upfront that a franchised business that is valued the same as a non-franchised operation will fetch a premium price than the non-franchised one. As you may have guessed the type of business you own will determine how fast you sell it and for how much.

Asset value
The assets your business own will also have an impact on the speed of sale. This is because buyers will not just be purchasing your goodwill but your assets as well. The more assets you have the greater the demand your business will have. The type of assets that your business has will also matter. Buyers will pay more for an engineering business than a garden service business even if they are valued the same.

Lease on premises
If you operate on your own property, you don’t have to worry too much about this. However, if your business has a lease, you have to think deeper. Buyers need security of premises tenure for them to achieve a return on their investment and earn a profit. If there is no right of renewal on the lease, you will have trouble selling your business. This is unless yours is a business that doesn’t need a permanent address to operate.

Rental of the premises
The higher your rental costs are the harder it will be for you to sell a business. High rental costs will make it hard for a business broker Orange County to find you the best buyer. This is because high rental costs will make it harder to operate the business after purchase.

Management team
If your business cannot operate without your current management team, it will be harder to sell. Buyers want the freedom of being able to hire their own team or even to do without some staff so as to cut down on expenses.

Debts
Money that your business owes is a minus. It will cause the value of your business to go down. If the bigger part of your business’ turnover is made up of credit sales then business brokers Orange County will want to look closely at age analysis of debtors and bad debt situation.

Other factors that affect the price include stock, available terms, availability of funding, duration of the business establishment, duration of ownership and more. Business owners should strive to fix their flaws before considering a sale.

Business brokers Orange County