Around 60 percent of businesses fail in the first ten years of business.
It shows how difficult it is to maintain a business throughout the years, especially if there’s a recession, a pandemic, or something else that severely affects your business.
This is why it’s important to know when to sell a business. You want to figure out the perfect opportunity before things go sideways in your business. You want to figure out when your business is the most profitable.
If you are thinking of selling your business, you need to know how to determine the value of a company.
There are a lot of factors that go into selling a business. There are a lot of factors that can help increase the profitability of your business before you sell.
Here’s a guide on how to determine the value of your company so you can sell your business for the most profit.
Look at Your Assets
One of the best ways to determine the value of your business is to look at the assets. You want to determine how many assets you have within the company that represents how valuable your company actually is.
In fact, assets can play a critical role in value because it’s something take into account with your customer base as well as how much revenue you are bringing in.
If you are trying to figure out your assets, a good place to start is by looking at your supplies. If you have an office building, are you selling computers, office desks, copiers, and any other office assets, and if you work in the office you could check the glazed partitioning greater manchester to organize your work area as well.
Assets may also include delivery trucks and manufacturing equipment. When you factor in your assets, you may realize that it gives your business an added value of thousands.
How Much Revenue Are You Bringing in?
Another way to determine the value of your business is by looking at revenue. When buyers looking at how much revenue and profit you bring into your business on a quarterly or yearly basis, it shows what your profit margins are.
If you have a higher than average profit margin, you are more likely going to be seen as valuable. Your business is going to appear more valuable because whoever buys your business will take over that profit margin.
It gives the buyer a favorable position in the market instead of starting from the bottom.
What Are Your Competitors Sold at?
Seeing what the market value of your business means looking at what your competition is doing. It means looking at your competitors and seeing what their value is and if it’s higher or lower.
If all of your competition has a higher value, it may mean your business is not as valuable. It may mean the market value for your business is low right now. This is why you need to do some market research and see how your businesses in your industry have done in the past couple of years.
You want to see if there’s been a gradual decrease or increase in the profitability of businesses that are sold in your industry.
How Many Customers or Clients Do You Have?
Another way to assess the value of your business is to see how many clients or customers you have.
If you have a wide customer or client base, it could help you sell your business for more value. You want to show prospective buyers how many consistent or lifelong customers you have.
This shows the quality of your business and how it does with clients or customers. It also shows how well your customer service is as well as your marketing and sales team performs.
If you do sell your business, your buyer may want to include your team instead of bringing on their own team in order to maintain that relationship with customers and clients.
Look at Multiples
What are multiples?
A multiple of a business is looking at the financial record of a company. It’s looking at two metrics to determine the value of a business.
The metrics are cash flow and performance. These metrics, compared across your industry, provide a standard of what your business is worth.
The goal is to have a higher multiple because that means your business is less risky.
That’s why you should be asking, as a business owner, how to achieve a higher multiple. You want to know what you can do in your business to achieve a higher multiple so investors or buyers view your business as more stable.
One of the ways to give your business a higher multiple or more stability is to have more long-term contracts with clients. For example, if you have multiple long-term contracts just starting out and you want to sell your business, it can show that there’s some stability in your company.
You also want to make sure that you have long-standing relationships with your customers and suppliers, which can also helo with creating a higher multiple.
Now You Know How to Determine the Value of a Company
Learning how to determine the value of a company is important if you sell it to the highest seller. You need to do research and know what factors play a role in the value of your business.
With this guide, you have a better and fuller understanding of what multiples are, how assets play a role, as well as other factors. You know what you need to do in your business to give you more opportunities to sell your business for more value.
If you have questions about how to sell your business for a higher price, you can contact us here.