• Marion Van Keken-Rietkerk

How to Maximize the Value of a Business


Have you considered the idea of selling your business or buying a business?

In order to Maximize the Value of a Business one needs to look beyond the financial statements.

Yes, historical income reflects anticipated future benefits, but has the owner maximized the potential of the business by addressing the many drivers that affect the value?

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) reflect the financial performance of the business, but what is the cash flow of the business? There are other considerations, like Working Capital requirement (WC) and Capital Expenditures (CAPEX). Ultimately a buyer wants to know what the Free Cash Flow to Firm is (FCFF) and Free Cash Flow to Equity (FCFE).

These are the Main Value Drivers behind a Successful Business:

  • Historical Financial Performance

  • Future Profit Potential

  • Market Demand

  • Cost and availability of Capital

But there are many more value drivers to consider:

  • Goodwill, is it personal or commercial?

  • Anticipated Capital Expenditures

  • Are there Systems and Processes in place and documented

  • What is the Growth Potential of the business

  • Does it have Intellectual Property

  • Is there Research and Development activity

  • What is the business’ Status within the Industry

  • How much Competition is there

  • Branding

  • Market Concentration

  • Customer Dependency

  • Supply Dependency

  • Is the business Cyclical in Nature

  • Dependencies and vulnerability to the economy(i.e. Oil Industry related businesses)

  • Market Penetration

  • What does the Management structure look like

  • Are there any changes in Regulations on the horizon

  • Does the business have specific Licenses or Accreditations

  • Does it operate in a Niche Market

  • Product Maturity

  • Market Saturation

  • Obsolescence (Equipment, systems, Inventory)

  • Unionization

  • Technology

  • Portability (can the business be moved)

  • Barriers to Entry

  • Competitive Advantage

  • Assets

  • Human Resources

  • Location

  • Owner Dependency

  • Clean books

  • Contracts and recurring revenue

  • Product differentiation

  • Lease

  • History (Social media status)

  • Culture

As a Seller you will want to consider which one of these you can improve on to maximize value. For a buyer it is important to consider all of these factors before making the decision to buy a business.

To find out more, read our information on Business Vale Drivers or contact us so we can help.

#Business #SellingaBusiness #BusinessSuccession

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Selling Your Business? Talk to our Consultants First

 Marion Van Keken-Rietkerk*

A. Sc. MBA CBI

*Personal Real Estate Corporation

Tel: 604.617.8118


 

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