In order to determine the worth of a business, there are multiple factors to consider. It goes beyond how much money is made on an annual basis; in fact, all aspects of its past, present, and future are considered. It can seem daunting to try to calculate this on your own. For this reason, a proper business valuation must be conducted. This is the first step you will need to take when working toward selling your business.
The initial step for a business valuation is considering future performance. This may sound strange, but the truth is, a business’s value is dependent on projection and not past performance. Even if a business has done well in the past, a potential buyer will want to be confident that it will continue to do well in the future. The current status of the company in the market and what a new buyer can do with it can greatly affect how much a business is worth.
The next very important factor is earnings and revenue. Although revenue is important, a business with a greater earnings is considered more valuable. Buyers want a return on investment, therefore earnings rule. However to compare businesses, these earnings must be recasted to reflect the true earnings capability of the business.
Similarly, another important factor is the types of assets owned by the business (i.e., industry-specific machinery or equipment, vehicles, etc.). The type of assets affects the advanced rates of the lender and the depreciation life of the assets, which in turn impacts the value of the business.
Transworld Business Advisors offers free business valuation consultations; contact your local Transworld office to schedule an appointment so that determining your business’s worth is stress and anxiety free. A skilled Transworld advisor can help you review your financials in order discuss valuation and guide you through the steps of preparing the business sale. Our experienced brokers will take the time to get to know your business and help you determine your business’s value so that you can make an informed decision to sell.
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