Top Factors that Affect the Value of a Business

Hiring an experienced business broker San Diego will help you better understand the strengths and weaknesses of your business. This is because you will get a thorough business valuation report that sheds light on every aspect of your business. As you get ready to sell, you have to make your business as valuable and attractive to potential buyers as it can possibly be. But how do you do that? This post looks at the main factors that affect the overall value of a business.

Client concentration

The first thing buyers will consider is your customer base. Buyers are afraid of businesses that rely on a handful of customers. This is because if these customers leave the business will fail. To help improve the value of your business, business brokers San Diego will first advise you to increase your customer base. The objective is to make sure your business doesn’t just rely on a handful of customers but on many.

Recurring revenue

The most attractive businesses are those set up in a recurring revenue model. If yours is a seasonal business that only does well in certain seasons, buyers will be afraid to invest in it. The case is different if yours is not a seasonal business. Buyers want to make sure that your business will continue to generate revenue all year round. A business that uses a recurring revenue model is worth more than one that isn’t.

Seller financing

If you want to lure more buyers in, you need to offer seller financing. This is an option in which you allow the buyer to pay a percentage of the selling price upfront and the reminder over a specified period of time which could be 3, 5 or 7 years. Seller financing is recommended if your business is hard to sell. Offering seller financing makes your business more affordable to buyers. Your business broker San Diego can help determine if your business is suitable for seller financing and how much interest on the loan you should charge.

Business model structure

This is yet another consideration that is made by buyers when considering the purchase of your business. Buyers want to invest in a business that has a solid business model structure. If you are in the financial services sector, buyers will want to know if you use a fee-based or a commission based structure. They will also check if you are a broker-dealer and who you are affiliated with.

Business management structure 

Last but not least, your business management structure will matter. If the owner is involved in all decisions, such a business will not be attractive to buyers. The first thing your business brokers San Diego will do is restructure your management so that the business is not dependent on the owner.

There are many other factors that affect the value of a business. A thorough business valuation report will help identify the strengths and weaknesses of your business.

Business Broker San Diego