The overall selling price of a property is influenced by the valuation. Business appraisals are based upon a multitude of criteria and indisputable records such as comparables, projections, discount rates, EBITDA multiples, and more. The appraiser may overlook the business elements. That’s why it is extremely important for the appraiser to first grasp the purpose of an appraisal before getting started.
Is There Unwritten Value?
A prospective buyer is mostly looking for quality in depth of profitability, market share, and management. Other information that is highly valued to potential buyers is key business elements such as operations, value drivers, market, post-acquisition, and fundamentals.
Consider these questions regarding a couple of these crucial elements:
Is there an abundance of market competition?
Does pricing reasonably align with the demographic?
Are the company goals consistent with advancing technology?
Are there various and/or global means of reach and distribution?
Does the business have more potential beyond a niche?
What’s the company’s competitive advantage?
What are the strengths and weaknesses of its competitors?
Is there a great deal of alternative technologies?
Are there various vendors?
Is the company’s location convenient to its target audience?
Increased Success & Valuation
Businesses that are successful thrive because of company-wide values and consistent customer service. In his book The 100 Absolutely Unbreakable Laws of Business, Brian Tracy summarizes this as “a company-wide focus on marketing, sales and revenue generation. The most important energies of the most talented people in the company must be centered on the customer. The failures to focus single-mindedly on sales are the number one causes of business failures, which are triggered by a drop-off in sales.”
Tracy continues by pointing out that trends may be the most pivotal consideration and bottom-line contributor to any given company’s success and, therefore, valuation. For 2017, projected trends include the increased use of video marketing, crowdfunding as a source of product validation, nutrition and fitness tracking products, the use of e-commerce, and the acquisition and training of remote employees.
In an attempt to establish market share, start-up companies are likely practicing as many current trends as possible within their limited funding, while mature companies are hiring millennials to keep their business hip to those same trends. Business owners would benefit from studying and ultimately executing these current trends, as well as from acknowledging the successes and mistakes of their competitors.