Top Factors Influencing the Price of Your Business
If you are preparing to transition ownership of your business, or just beginning to consider your options for stepping away from the business, it is important to be prepared and have accurate expectations about the sale price. There are a range of factors that have an impact on the price or value of your business and listed below are some of the most important:
Type Of Business – different types of businesses (e.g. manufacturing, service companies, distributors) are hard to compare and can often generate a very different sale price. However, generally if your business has a proprietary product, special expertise, defined contracts or provides any value-addition for clients you will see higher sale prices than business without.
Revenue Size – Generally, as the level of revenue a business has rises, so does the selling price.
Customer Base – Usually, the wider and more loyal the customer base, the higher the selling price.
Marketing Position – A company that occupies the uppermost position in the market, or has a unique niche will sell for a premium over other companies.
Industry Outlook – If the outlook for the industry is positive and growth is predicted, the sale price will rise. The stage of the industry life-cycle is also important. If it is experiencing a period of consolidation and larger companies are acquiring smaller ones, the price for the smaller ones will rise.
Depth of management and sales teams – Generally, if the business owner bears all managerial responsibility, the selling price will decrease.
Company History – The business’s track record is important in the sale. If you can demonstrate a history of consistent growth and profit, buyers will be willing to pay more. This also works in terms of the story of the company. A solid company history increases its tangible value.
If you are considering selling your business, or need to speak with a consultant regarding your business options please contact The Quinn Group on 1300 QUINNS or submit an online enquiry for more information. We have an experienced team of lawyers and accountants who can advise you about the process, discuss alternatives and assist with the sale of your business.