DRIVERS

BUSINESS VALUATION

OF

KEY

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Factors Influencing Value Of A Business

There are various factors influencing business value but before discussing them, you need to understand that there are various categories of businesses in Australia classified according to their size.

The classifications are:- public companies- privately held and family small to medium enterprises - micro businesses

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Profit History

Drivers Of Business Valuation

The value of a business stems mainly from its profit. Not only current profit but also historical profit. Buyers like to see history of steady growth.

History

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Drivers Of Business Valuation

The Accuracy Of Bookkeeping And Records

All the bookkeeping and financial records of the business need to be accurate and up-to-date.

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Drivers Of Business Valuation

Market Demand

If the market demand for your business is high then the value of your business goes up.

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Drivers Of Business Valuation

Cash Flow Another factor affecting the value of your business is cash flow. Cash flow is the money left in the business over a period and must be distinguished from profit. You can be making good profits but if your clients don't pay their bills, you could be having negative cash flow in the business.

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Drivers Of Business Valuation

Strategic Value

Strategic value is where a buyer gains more from buying your business than just the profit. The two businesses together create extra value. This could be by virtue of the buyer gaining a key employee from the purchase, securing a key product that it can sell to its database or some other benefit of the transaction.

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Drivers Of Business Valuation

Economic Conditions

The next factor is the economic conditions generally. The better the economy the higher the price.

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Drivers Of Business Valuation

The Value Of Assets

The next factor influencing the value of business is the value of the assets. See elsewhere on this blog our post on Asset Valuation Method.

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Drivers Of Business Valuation

Future Earnings And Profit Potential

Just remember that a buyer will value your business according to their belief about the size of next year's income.

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For Advice On Your Business Valuation Or Sale

BCI Business BrokersTony Arena (Managing Director)

3/1 Alexander Street, Crows Nest, NSW, 2065Phone: +61 2 9439 3399Mobile: +61 411888148

Email: tarena@bc.com.auwww.bc.com.au

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Maximise Business Value

For help in maximising your business value take a look at our products here

http://bc.com.au/maximise.html

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For A Free Consultation On The Value Of Your Business

Visit our website

www.valueabusiness.com.au

Friday, 5 July 13