When you think of the world’s most successful companies who comes to mind? Apple? Wal-Mart? Cargill? Maybe Berkshire Hathaway? Besides being Fortune 10 companies they share another trait; they know what their companies are worth.
In fact the world’s best companies, both public and private, analyze their value on a regular basis. Public companies of course watch the value of their stock. They also invest in regular business valuations. The best private companies, and their shareholders, do the same.
What these companies understand is that Business Value is one of the most meaningful measurements of company health. Although revenue, gross margin and net profit are critical only Business Value really shows the overall health of a business in the marketplace. When a company receives a valuation it forces them to look not only at financial performance but also factors that drive that financial performance such as:
• Customer Concentrations
• Competition & What Makes the Company Different?
• Health of Industries Served
• Equipment & Technology
• Intellectual Property
• Management Team & Employee Expertise
• Growth or Declines in the industry
• Vendor relationships
• Growth Opportunities
• Risk Factors
• Strengths & Weaknesses
• Barriers to Entry
At Sunbelt we call these items Value Drivers. A company with many positive Value Drivers, such as long term and repeat customers, will have a higher value. Whereas a company lacking in Value Drivers will have a lower value.
So why bother will all this analysis if you are not ready to sell your business? First, it will let you know your value today as a comparison for future values. Second, it will provide you with ideas on how to increase the value of your company. Third, the analysis of your company financials and Value Drivers will provide insight into how to run your business better, even if you never plan to sell your business.
Unlike the big Fortune 10 public and private companies, you don’t have to spend a lot of money to know what your company is worth. In fact Sunbelt Business Brokers and M&A Advisors will provide you with a complimentary value range. The best companies know what they are worth; you should too.
