Friday, July 14, 2017
It’s been established that there will come a day when you will exit your own business due to any number of reasons; this could be voluntarily, such as retirement or a sale, or involuntarily due to death, disability, disaster, divorce or dispute. Regardless of the circumstance, it is in your best interest as business owner in the GTA to obtain a company valuation service to help prepare for your and your business’ future.
As you prepare for the future, one of your goals could be to increase the value of your business to best profit from it; whether you are building your personal wealth or ensuring that your company will be sold for the best price in given market conditions. The value of your company is driven by its future income or cash flow expectations, but with the future being inherently uncertain, the best thing to do is to increase your company’s operating cash flows, and minimize the risk associated with achieving or exceeding the projected cash flows. In effect, this increases the price an acquirer is willing to pay when you are selling your business in Toronto or the GTA.
But how exactly do you drive the value of your business to result in a favorable outcome in the future when you exit? Here are the 8 key value drivers:
A company valuation service in the GTA will track the financial history of your business, essentially examining your history of generating revenue, combined with the professionalism of record keeping. With greater revenues and profit margins, the value of your business increases, as reported in a company valuation report.
This pertains to the likelihood that your business will grow in the future, and at what rate. When your business consistently operates with a track record of meeting and/or exceeding prior growth targets, such as revenue and profits, and is backed by a solid business plan with future growth projections, a valuation for selling your business in Toronto will reflect favourable values, indicating the same outcome.
This reflects how dependent your business is on any one employee, customer or supplier to produce results. By improving business practices and minimizing your company’s dependence on one of these key factors, you can lower your risk profile and maximize value, as reported through a company valuation service in the GTA.
Valuation Teeter Totter
This pertains to your ability to manage your company’s working capital, while continuing to generate positive cash flow. By achieving a strong balance sheet that reflects excess working capital and positive cash flow from operations on a monthly basis, you can increase your company’s value, as reported in the valuation when you are looking at selling.
This represents the proportion and quality of automatic, annuity-based revenue you collect each month. With more revenues collected and saved from long-term contracts, or due to automatic subscriptions the higher the value of your company.
This indicates how well-differentiated your business is from the competition in the industry. With a strong niche and a competitive advantage in the marketplace, your business derives a higher value, as proven by a company valuation service in the process of exiting or selling your business in Toronto.
This refers to the likelihood that your customers will purchase goods and services again from your business, as well as refer you to others, thereby building a solid customer base. As the number of your satisfied and loyal customers increase, the valuation will reflect an increase in your company’s value.
Hub and Spoke
This pertains to how your business would perform if you were unexpectedly unable to work for a period of 3 months or more. By minimizing, or eliminating your company’s dependence on you, this lowers your company’s risk profile, essentially yielding a favorable valuation when you are selling it in Toronto.
You should know where your business ranks under the 8 key value driver areas, and identify the areas to focus on to increase the value of your business as you prepare for selling it in Toronto, or in the GTA. Call us at 905-305-VSPL (8775) for a reliable company valuation service.
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