RSS

9 Things that Make a Business Valuable

20 Sep

fire-inc-atlanta

The value of your company is partly determined by your industry. For example, cloud-based software companies are generally worth a lot more than printing companies these days. However, when businesses in the same industry are analyzed, major variations exist with respect to valuation. Because of the large number of Baby Boomer owners within the small business community, it is crucial for these business owners to consider building value now so they can obtain higher competitive offers when they transition out of the business. Here are nineĀ things that will make your business more valuable than its industry peer group:

1. Recurring Revenue

The more revenue you have from automatically recurring contracts or subscriptions, the more valuable your business will be to a future buyer. Even if subscriptions are not the norm in your industry, you should be able to find some form of recurring revenue that will make your company much more valuable than those of your competitors.

2. Something Different

Buyers buy what they cannot easily replicate on their own, which means companies with a unique product or service that is difficult for a competitor to knock off are more valuable than a company that sells the same commodity as everyone else in their industry.

3. Growth

Acquirers looking to fuel their top line revenue growth through acquisition will pay a premium for your business if it is growing much faster than your industry overall.

4.Cache

Tired old companies often try to buy sex appeal through the acquisition of a trendy young company in their industry. If you are the “darling” of your industry, expect to get a premium offer.

5. Location

If you have a great location with natural physical characteristics that are difficult to replicate (imagine an oceanfront restaurant on a strip of beach where the city has stopped granting new licenses to operate), you’ll have buyers who understand your industry interested in your location as well as your business.

6. Diversity

Buyers will pay a premium for companies that naturally hedge the loss of a single customer. Ensure that no customer amounts to more than 10 percent of your revenue and your company will be more valuable than an industry peer with just a few big customers.

7. Predictability

If you’ve mastered a way to win customers and documented your sales funnel with a predictable set of conversion rates, your secret customer-acquiring formula will make your business more valuable to a buyer than an industry peer who does not have a clue where their next customer will come from.

8. Clean Books

Companies that invest in audited statements have financials that are generally viewed by buyers as more trustworthy and therefore worth more. You may want to get your books reviewed professionally each year even if audited statements are not the norm in your industry.

9. Happy Customers

Being able to objectively demonstrate that your customers are happy and intend to re-purchase in the future and consistently make referrals will make your business more valuable than an industry peer that does not have a means of tracking customer satisfaction.

Like a rising tide that lifts all boats, your industry typically defines a range of multiples within which your business is likely to sell for; but whether you fall at the bottom or top of the range comes down to factors that have nothing to do with What You Do, but instead, How You Do It. Consider the following eight value drivers:

Learn more about Fire Inc Atlanta here.

Advertisements
 
Leave a comment

Posted by on September 20, 2016 in Success

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: