What determines the true market value of your business?
Possibly, you have heard about “rules of thumb” and presume that your business will be worth approximately what a similar size company in your industry is worth.
But, it isn't that easy.
There's what your business is worth today to you.
What it's worth to a prospective buyer, now or in the future.
And, there's what it could be worth with a bit of proactive planning.
There are at least eight factors that drive your business value, and each of them is potentially more important than the industry you are in.
Would you like to know what your business is worth? What's more, what it could be worth with a small amount of effort and investment? Business brokers have a variety of methods to determine value. We utilize a number of them. In particular, we process business data through sophisticated proprietary algorithms - a SWOT system used by over 50,000 businesses worldwide. Another is a detailed category-by-category analysis of your business tax returns for the past three years. Some brokers will provide those services for you without charge or obligation.
Want to grow your business value? Here are three of the most important secrets to building business value:
1. Cultivate Your Differentiation from the Pack—Develop Your Unique Selling Proposition
People don't acquire what they could easily build themselves. If favorably low prices are your chief competitive advantage, a prospective business purchaser could conclude that they can merely open up as a competitor and win over your customers with introductory discounts for far less cost than buying you out. You need to develop a unique connection to the market, or an expertise in serving your customers, or a proprietary product or way of doing business, or a technological or logistical advantage, or a team of exceptionally competent employees—one or more exceptional attributes that make buying your business far more attractive than trying to compete with it.
2. Generate Recurring Revenue
A key factor in any business purchase decision is the buyer’s assessment of how the business will perform after they buy it. There is nothing more comforting and reassuring than recurring or “automatic” streams of income from such things as subscriptions, service contracts, or monthly, seasonal, or annual renewals. Almost any company can structure itself so that at least some of its revenue is recurring; and, the more "automatic" income there is, the more valuable the business will be.
3. Build Customer & Market Diversification
Reliance on one or just a few customers for the continued prosperity of your business is extremely precarious and raises an immediate and urgent “red flag” for potential buyers. The most valuable and sustainable businesses have many customers, each representing a small fraction of total sales, rather than one or a few large accounts providing a significant percentage of the revenue. Most potential acquirers will either walk away or greatly devalue your business if any one of your customers represents on average more than 15% of your sales.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of successful closings. Office: 909-255-8353, Cell: 509-951-7230.
|Timothy Cunha JD, Business Broker: SF Bay Area
SF Bay Area experienced attorney, & business broker. I & my EvergreenGold team offer owners sound advice & expertise to build business value & achieve profitable sales. Call today for a FREE business evaluation & SWOT analysis for your business. Call me direct at 650-600-3751, 650-866-5393 Text.
|Manjit Singh, Business Broker - SF Bay Area, Central Valley
Assistance in the SF Bay Area & Valley. Contact me about buying or selling a restaurant, liquor store, gas stations, markets, and c-store businesses. If you are looking to buy or sell a SF Bay Area, Central Valley liquor store, market, c-store, restaurant, etc phone me direct at 510-417-9429 Cell.
|Michael Floorman, Business Brokerage, BTI, San Francisco Bay Area
Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|Thinking About Selling A Small Business? Know These 8 Factors That Matter
The likelihood of selling a business is often determined by external factors in the marketplace. Here are eight influences on how easy, or difficult it might be when selling a small California business. Peter Siegel at 925-785-3118 (BizBen ProSell Program) explains these factors for owner/sellers.
|Business Purchase Financing Help - Expert Tips For Faster SBA Loan Approvals
Business purchase financing advisor Peter Siegel, MBA shares his views on SBA loan financing. He explains the nuances of the SBA loan process when considering business purchase financing or getting pre-qualified. Reach Peter Siegel, MBA direct at 925-785-3118 regarding SBA & Non SBA Loan Financing.
|8 Tough Questions You Most Likely Will Be Asked When Selling Your Business
When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous. You need to be prepared. Here are some of the key questions you can expect to be asked. Tim Cunha (SF Bay Area Business Broker at 650-600-3751) reviews many of these possible questions.
|Due Diligence Checklist: 10 Key Items To Investigate When Buying Businesses
Buying a California small business involves reviewing due diligence checklists so buyers can learn enough to determine whether to proceed with a deal. Here's a due diligence checklist. Peter Siegel, MBA (BizBen ProBuy Advisor & Business Purchase Financing Expert) at 925-785-3118 shares his views.
|December BizBen Index: 1,071 California Small Businesses Sold Last Month
Total sales of California small businesses sold were down from last month and overall from last year's completed sales transactions. Several factors contributed to these numbers including: owner/sellers waiting to list until 2020, more business brokers exiting the industry, lower buyer demand.
|BizBen Podcast & Webinar: Business Purchase Financing And SBA Loan Options
Ever wonder what is involved in obtaining business purchase financing to buy a business or franchise? Peter Siegel, MBA who has over 25 years advising on all types of financing for business buyers in this BizBen Podcast & Webinar - SBA loans, Non-SBA Financing, Alternative Financing Sources.
|6 Simple Things To Increase Business Value Before Offering It For Sale
How do you value a small business before putting it on the market? Tim Cunha, JD offers 6 items all business owners should consider. Other advisors and business brokers also weigh in on this very important topic especially when over 70% of small businesses never end up selling (due to pricing).
|How Do I Determine the Value Of My Small Business? Or The One I Want To Buy?
How do you determine the value of your business when you go to sell or even buy a business? There are so many factors and that is usually one of the first items serious buyers inquire about. Tim Cunha JD (SF Business Broker at 650-600-3751) initiates this Discussion On BizBen with other Advisors.