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How to Value a Business (For Buying & Selling)

An expert roundup to understand how to value a business while you want to buy or sell it.

How to Value a Business
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Whether you’re selling or buying a business, you’ve probably found that it’s difficult to determine the value of the business. Many factors go into valuing a business, and it’s not an exact science. That’s why professionals are generally involved in the transaction and the price is negotiated.

But you need to have some idea of value before selling or buying, so how should you value a business? We’ve rounded up some experts to share their thoughts.

Joshua Wood | CEO and Founder

Bloc

Josh Wood

“There are a number of key factors that you can measure to determine the success of a business. Some of these factors include profitability, customer satisfaction, employee satisfaction, market share, and brand equity.

Each of these factors is important in evaluating the overall success of a business. Profitability is essential for any company to remain afloat, while customer and employee satisfaction are key to retaining customers and employees. 

Market share and brand equity are also important measures of success, as they indicate how well the company is performing in the market and how much consumers trust the brand. What do you believe is essential – profit, marketing, number of employees? It depends on the business.

Essential ingredients for a business might include a great product or service, an effective marketing strategy, and a talented and dedicated team. 

However, these things are not enough on their own – a business also needs to be profitable in order to survive and grow. And while it’s important to have a good number of employees, too many can be costly and can actually hinder growth.

So it really depends on the individual business – there is no one-size-fits-all answer. But if I had to choose just one, I would say that profit is essential for any business to succeed.”

Kevin Mercier | Founder

KEVMRC

Kevin Mercier

“I believe the valuation of a business is all about the money it makes and the money it’s likely to make in the future.

A buyer will want to know how much they can expect to make after they take over your business. I believe the most important measure of success for my business is profitability.

I look at how much revenue my business brings in, and more specifically, how much it has left after covering all the necessary costs. Alongside profitably, I also keep an eye on my return on investment.”

Misha Tsidulko | CEO

Hearth

Misha Tsidulko

“While most business owners think revenue is the only important factor when measuring the success of a business, there’s actually more to it than that. At Hearth, we like to focus on three key factors when measuring our success.

Today, consumers have so many options to choose from when it comes to products and services. In order to stand out, you need to offer something unique and/or compelling that the customer can’t find anywhere else.

This not only keeps away the competition, but it also helps build long-term customer relationships. Listening to your customers is key to any successful business. Collect customer feedback and transform them into actionable items for your business for your marketing and customer service experience. 

Scaling revenue is important because it reflects the success of management and the ability to generate cash flow that can be used to improve the business. Additionally, increased revenue awards businesses the opportunity to increase their market share and attract a larger customer base.  

Without employees, businesses can’t operate and grow. It is important to have well-trained and experienced professionals working for your company.

This ensures that tasks are completed efficiently and that your business is able to grow and scale quickly. Providing your employees with the correct training and resources is key to having a successful team. 

Ask yourself, is there enough headcount to prevent burnout? Do you need to start using software to streamline manual tasks? Successful leadership should understand these situations and react to support their team appropriately.”

Craig Young | CEO

The Roof Doctors

Craig Young

“Valuing a business is a complex process that involves evaluating a variety of factors. The most common measure of success is the company’s enterprise value, which is calculated by subtracting its total liabilities from its total assets.

Other measures of success can include the company’s net income, total revenue, and operating cash flow.

Additionally, measures such as the company’s market share, customer base, and competitive position can also be used to assess its value.

Ultimately, the success of a business is determined by its ability to generate returns for its shareholders and stakeholders.”

Caleb Riutta | Co-Founder

Dusk Digital

Caleb Riutt

“The measure of success for valuing a business is typically determined by the ability of a business to generate and sustain profits over time. Generally, the value of a business is based on the present value of its expected future cash flows, as well as any assets that it holds.

Additionally, the value of a business can be affected by the competitive landscape, its industry and sector, the strength of its management team, and its competitive advantages.

Other factors, such as industry trends, technological developments, and consumer preferences, can also play a role in the value of a business.

Ultimately, the success of a business is determined by its ability to earn a return on investment and create value for its shareholders.”

Martin Boonzaayer | Founder

The Trusted Homebuyer

Martin Boonzaayer

“Valuing a business involves a variety of metrics and measures. A key measure of success is the company’s financial performance, including profitability, cash flow, and return on investment.

Other measures of success include sales growth, market share, customer satisfaction, and employee engagement. Identifying, tracking, and understanding these metrics is essential to accurately valuing a business.

Other intangible factors, such as brand reputation, customer loyalty, and competitive advantage, can also play an important role in a business’s value.

Ultimately, any valuation should be tailored to the particular business being evaluated, considering the company’s financial and non-financial performance.”

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