How much is my business worth? The simplest answer to this often asked question is,
‘Whatever a buyer is prepared to pay’.
Value is, of course, a subjective concept. At its best, valuation is an art. It is influenced by institutional, macroeconomic and personal factors.
Given the subjective nature of calculating an accurate valuation range, it is tempting to avoid the exercise. However, if you are thinking about selling your business, raising new capital or, in the case of a family business, planning the succession process, this type of analysis may be critical to protecting your personal interests. Knowing the value drivers of your business should help you to change your focus from short term to long term in another word from being profitable to increasing the business value in order to build personal and business financial stability.
This series of article aims at giving you an idea of the methods used by the financial community, mainly relying on quantitative techniques to arrive at an estimation of market value for operating businesses, and subsequently refines the estimate to take qualitative or subjective factors into account. These qualitative factors constitute the art of valuation.
The focus of the articles will be on the significant emphasis placed by potential purchasers on subjective characteristics which cannot be discounted especially in the case of businesses with few tangible assets, low profitability… but with high Intellectual properties or specialised services.
First – let’s talk about the different kinds of value:
Now that I have discussed the various types of value in my next articles I will talk about
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If you envisage to transition out of your business in the near future and would want to explore what you should do please do not hesitate to call Jean-Bertrand de Lartigue on +44 1656 766 363 or e- mail him at JB@macint.co.uk