Other Factors Which Effect Buyers Value of Companies in Orange County

Of course, buyers can evaluate all objective measures of the value of a business–EBITDA, Profit margins, and growth trends.  However there are other things which most buyers take under consideration for drivers of valuation.  Here is a list of subjective variables which can effect the way a buyer values a business.

1.  Buyers are looking for a strong management team with a vision for the growth of the business.  Unfortunately most entrepreneurs like to run mean and lean to create monetary value for themselves but this creates a management vacuum which a buyer must address.  Other questions are about the transition period and what the staffing will look like post sale.

2.   Industry Trend’s impact the value of a business and will be scrutinized by a buyer.  Questions asked by the buyer will be “Is the business growing faster or slower than the industry”, “Is the growth sustainable”, “How is the growth being driven and what is the reason for the growth”.

3.  Concentration Of Supplies and Customers.  Sellers must be able to articulate what makes them comfortable in transitioning these relationships to a new owner.

4.  Is There Room for Growth?  A buyer will need to evaluate at what rate of capacity is running at and what elements (building, equipment, people) are necessary to expand.  Also at what cost, cap ex, would be necessary.

Businesses which have answered these questions positively are in much better position to be valued at a higher multiple than those companies which have not addressed these subjective variables.

For an evaluation of your particular business, please contact us to discuss.