THE KEY FACTORS THAT IMPACT A BUSINESS VALUE

As a business owner, you may be asked what your business is worth. Potential buyers, business partners, or financial investors will want to know the answer to this question. While there are many methods to determine the value of your business, there are a few common key factors that go into determining the value.

The following article breaks down the key factors that help determine business value.

5 KEY FACTORS THAT IMPACT YOUR BUSINESS VALUATION

1) Financial Performance

While looking at how much potential your business has to grow, it is also important to take into consideration the income of your business when determining business value. When someone is conducting a business valuation, they will often look at income trends to help them in the valuation process. An increase in income over time will have a positive effect, while a decrease will have a negative impact on the value of your business.

2) Growth Potential

One of the first factors is growth potential. There are some business models with higher growth potential than others, which could very well increase the value of the business. Growth potential varies based on the industry but is also based on the company’s potential.

3) Customer Satisfaction

The reputation of your business can also have an impact on the concentration of your business; another key factor when determining the value of your business. Having a strong and diverse clientele will impact your business positively. The same rule also applies to product concentration as well. Instead of having one very successful product, it is more valuable to have a few different products that are all successful. It is better to have more diverse clients, and products instead of having limited clients and products since the loss of either could have a significant impact on your business as well as the value of your business.

4) An Allstar Team

In addition to having a prime location, having the right staff and management that is reliable can increase the value of your business. This then can trickle down to the reputation of your business. While this is an intangible asset, it is an important asset that could improve your business financially and increase its value in the long run.

5) Product or Service Differentiation

Do your products or services provoke consumers into choosing your brand over your competitors? Product or Service Differentiation is another factor that helps increase your business valuation.

In some cases, an effective differentiation strategy may require adding new functional features or may be as simple as redesigning packaging. In other scenarios, differentiation might just involve creating a new advertising campaign or other promotions.