Monitoring value is essential in any economic environment, but especially when the market is moving fast. Although the pandemic slowed Florida’s business sales in 2020, the number of business owners looking to sell began to climb at the start of this year and has continued to grow, according to Green & Co. Business Brokers. Even if an owner isn’t ready to sell, most want to maximize the value of their business. Ideally, business owners and their management teams should begin monitoring value at least five years before considering an exit.
Most people assume valuation is a quantitative science focused solely on financial statements, forecasts, multiples and rates of return. But it’s often more qualitative.
Valuation is a determination of future business expectations. To accurately determine those expectations, it’s critically important for a business owner to identify and understand what drives value. What factors increase cash flows and reduce risk? We believe these seven factors, which apply to most businesses, are essential to increasing cash flows and reducing risk — thereby enhancing overall company value.
- Capital access.
- A diversified customer base.
- Financial performance.
- Human capital.
- Market environment.
- Long-term forecast.
- Technology.
Ongoing assessment of a company’s value drivers is integral to success. The valuation process involves both a quantitative and a qualitative evaluation of a company that should be part of any business owner’s standard operating procedure as a useful and essential business management exercise. A valuation assessment can provide the business owner with meaningful and often actionable information that highlights the real intrinsic value of the firm and ultimately helps maximize performance.
"Ideally, business owners and their management teams should begin monitoring value at least five years before considering an exit." Please contact me if you would like to discuss.
Steve Niehaus, MBA, CBI, CM&AP
239.565.3171
