There are many factors that depending on the situation can impact the value of your business. Understanding key value influencers and how they could affect your business will allow you to eliminate potential negative impact to your business. Here is a list of a few key factors to consider:
VOLATILITY OF REVENUES/EARNINGS
The main factor of Business Valuation is the estimated future ongoing earnings stream. If revenue and/or profit have been unsteady or unpredictable, it is hard to estimate with any level of certainty the future ongoing earnings. This leads to a higher level of risk, which is a key component of valuation. An important motto in business valuation states, “The higher the risk, the lower the value”.
LACK OF MANAGEMENT DEPTH/OVER-RELIANCE ON KEY PERSONS
It should be obvious that a well-run company with a strong management team is important in Business Valuation. When the owner is heavily relied on to generate sales, manage customer relationships and daily operations a significant risk exists as too much of the business is reliant on one person. Many times businesses with these issues are not transferable.
LACK OF DIVERSIFICATION
It’s critical to diversify whether it concerns your products, customers, location, etc. When you diversify, you present yourself with alternatives, should your business be faced with unfavorable conditions. Most of the time, these unfavorable conditions are unforeseen and uncontrollable, but diversification can serve as a cushion to the impact. Understanding these negative influencers will help you recognize them before they become an issue for your Business. In addition, we have generated some helpful tips on how to increase your business’s value.
Business Valuation By Venture Care
Venture-Care organizational structure, vast experience in Business Valuation, and research tools allow it to provide excellent, supportable valuation services regardless of the type of valuation report requested and the size of the subject company. Depending on the needs of our clients and the purpose of the valuation, we can offer different types of valuation reports, ranging from an opinion letter to a full, comprehensive valuation report. We pride ourselves in knowing that we can provide a flexible fee structure for our valuation services and turnaround delivery time for our clients.
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