The market value is one of the main aspects that buyers look for in your business. That means if your company has a good market value, you can sell your company for a good amount. In other words, it is an approximation of how much the buyers will pay if you are selling your small business. There are several factors that determine the value of your business and it varies depending on the type of industry you are in.
Knowing the value of your business is very helpful because it will allow you to work hard to increase the value and it will attract more prospective buyers if you are considering selling your company. Here are some of the factors that will determine the value of your business.
Cash Flow Of The Business
This is one of the main factors that are very essential for estimating the value of your business. The businesses that require high working capital or have high fixed assets do not have a lower market value because the cash flow will be lower when more of the profits are invested back in the business. Even the revenue of your business is secondary to cash flow while determining the value of your business.
Financial History Of Your Company
Another important factor that determines the market value is your company’s income. However, most of the buyers will be more interested in seeing the financial history of your business and how they are trending. The buyers may want to know how your company is performing in the past few years and in which direction the company’s expenses and revenues are trending. If the revenue of the company is increasing over the past few years, it will increase the market value and the value will decrease if the expenses are increasing.
Future Growth of Your Company
Anyone who wishes to buy your business wants to make sure that they made a good decision and that only matters if your company continues to grow and make a good profit. If your company has a good potential for growth, it will increase the market value. The buyers won’t invest in a company that does not has high growth potential.
There are several other factors that determine the value of your business. The size of your customer base is one of the major factors that affect the market value because a big customer base will ensure the future growth of the business. If your company has skilled employees and a competitive advantage, that will surely increase the market value.