Valuing a Business
Knowing what your business is worth, and how to increase its value, is critical for all business owners.
When it comes to valuing a business there is no single formula that applies to all businesses in all sectors, nor even to all businesses within a particular industry. Instead, a number of factors will have to be considered when making an accurate valuation. These will probably include:
- The prospects for future growth - buyers pay more for businesses with high growth rates
- Profitability - although generally the higher the profits, the higher the value, some buyers might prefer a business with areas in which large efficiency savings can be made
- Customer base - not only the size of your customer base, but also the quality of your customers might be important
- Diversification - if you have a wide 'business mix', the prior reorganisation of the business may be advisable so that parts of the business can be sold
- Cashflow and financial management - the size and certainty of cashflow, and the strength of the balance sheet and financial management are all vital factors.
While you will obviously not wish to undervalue your business, it is also important not to overvalue it. An inflated asking price will dissuade buyers, or make them think you are not serious about selling.
In the end, the value of your business will be dependent on the laws of supply and demand. If there plenty of willing suitors for your business and few sellers in the marketplace, you will get a good price. In an ideal world, you can allow buyers to set a price through competitive bidding.
Although a business is only ever worth what a potential buyer is willing to pay for it, there are measures you can take to improve the value of your business, and also to make an accurate estimate of that value.
We can assist with all aspects of business valuation. contact us to discuss your particular circumstances (such as selling your business) and help with valuing a business in Wirral and the surrounding areas.S