Factors Effecting Valuation

While business valuations are very subjective, there are 16 key factors to take into consideration when valuing a business.

1. Annual Sales and Profit Trends – What are they for the last 3 years?
2. Lease Terms & Conditions – What are they?
3. Marketing – What stage is the business in – infancy or maturity? How long has the present owner owned it? What is the primary source of sales? How is the company positioned? What are the marketing/sales programs?
4. Presentation – Is the business presentable (clean, organized)? What is the condition of environment?
5. Business Hours – What is the number of days and hours of operation?
6. Type of Products/Services – Are the products/services proprietary or commodities? Are they diverse? What are their advantages?
7. Type of Business – Is it a franchise or an existing business?
8. Systems –What are the systems in place for accounting, employee management, software/hardware and sales/marketing?
9. Financial Outlook – What is the asset base (high or low)? Are there records that reflect profit/sales trends? Is revenue sustainable? What are the growth and expansion opportunities? What is owed and what is coming in (debts, credits and receivables)?
10. Marketplace - Who are the competitors? What are the barriers? How does the industry landscape look? What is the geography/location of the business?
11. Management & Employees – Is the business managed by the owner or hired help?
12. Customers – What are the # of customers and their contribution to revenue?
13. Suppliers – What are the # of vendors, their contribution to the business and how much does the business depend upon them?
14. Relationships/Uninterrupted business – Can customer, supplier and employee relationships withstand a change in ownership?
15. Legal Issues – Are there any lawsuits, environmental issues or pending regulatory changes?
16. Terms & Stock – Will the purchaser buy or the seller sell? Does it require a low or high down payment?