Business Valuation

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When valuing a business there is a range of variables that will affect the price.

Knowing how much your business is worth is always important even if you’re not in a rush to sell currently. It gives you an indication of how your efforts can be rewarded if you were to sell and the options available to you after. One of the keys determining factors when valuing a business is the balance sheet. The balance sheet is a snapshot in the time of the company and can vary dramatically over the course of time. Any acquiring business owner who wants to conduct some form of due diligence can ask to see monthly management information. This will show how the balance sheet has changed over time along with a profit and loss report. There isn’t one determining factor when evaluating a business. Many different factors are taken into consideration.

The Profitability of the business

If you are thinking will the profitability of the business alter the valuation of your business, then the answer is yes it will. The reason being is the net profit or EBITDA figure which adds back accountancy figures in the year-end accounts will determine the profitability.

The Industry the business operates in

The industry and size of the business will hugely alter the projected business valuation. The reason for this is one of the variables a business broker will take into consideration is the EBITDA. Moreover, there are other factors that will go into the valuation. If reoccurring revenue is present such as monthly billing this can increase the anticipated sale price.

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