What Factors Increase A Business Valuation?

August 10, 2022by Aurora Financials0

A professional business valuation can give you an insight into how much your business is really worth. This information is essential when selling your business or raising capital. You want to get the best price for your business and not sell yourself short.

When it comes to business valuations, there are several factors that can increase the value of your business. In this article, we will look at a few of these factors.

Potential For Growth

Anyone looking to buy or invest in your business considers the future potential of the business. Does the business have good products or services that will continue to be in demand in the future? Businesses with a high growth potential are likely to have higher valuations, no matter their industry.

Financial History

When having your business valued, you should have all of your accounts in order so that key data is available during the business valuation process. Your current and historic earnings, cashflow, expenses and overall profits will play an important role in the valuation of your business. Past financial performance is helpful when assessing future potential earnings.

Assets

Business assets and their values are essential in any business valuation. Assets can include machinery, intellectual property, business vehicles and more. It should be noted that some buyers will not be interested in certain assets and may request a discount if certain assets are not included. It’s important to note that certain assets depreciate over time which reduces their overall value to the business in the future.

How Your Business Is Run

How well your business is run also plays an integral role in the valuation. Is it run effectively and efficiently? What type of systems, processes and internal controls do you have in place, and do they work well? The quality and expertise of your staff and their various skillsets will also be assessed, as they can be seen as assets too!

Business Reputation

What do people in the community think about your business? Having a good reputation and being well known certainly increases your business valuation. Online reviews and having a strong social media presence are becoming increasingly important to a business valuation.

These are just a few of the factors that are looked at in business valuations. An in-depth, professional business valuation will take many other factors into account.

Are you looking for business valuation services in New Zealand? Our expert team at Aurora Financials carries out professional business valuation services. Please get in touch with us if you want to learn more.

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