The price or value of the business sale depends on several factors. It is important to understand the numerous factors that have a direct impact on the value of your business and that might be responsible for fetching lesser money than what you have set the target. Identifying these factors in advance will help you in making the necessary corrections beforehand so that you can avoid those mistakes. Let us have a look at some of these factors.
The factors having an adverse impact on sale of business
Excessive dependence: There are situations where a specific business is excessively dependent on a customer, an employee, or a supplier. This dependency has an adverse impact because when that customer leaves, or the employee quits, or the supplier is no longer operating the business then it will directly hurt the profits of your business. This dependency is bad for the value of your business. As a business owner you must ensure that the maximum revenue that comes from a single company should not be more than 10-15%.
Shortage of funds: The valuation of the company depends on a lot of factors, including the two prominent ones: the funds it generate and the working capital associated with the company. When buying your business, the buyer will essentially write two checks, one is for the seller and the other is for the working capital. However if the buyer has to input a lot of working capital to the business then he or she might end up paying you less. This is why you must increase the cash flow through the acceleration of receivable accounts and extending the accounts that are payable for keeping more funds at hand. The San Diego business broker can offer you the right guidance and ways of increasing the value of your business.
No plan for growth: The buyers are ideally looking for those businesses that have a well laid out plan for future growth. Obviously when someone is investing big amount into a business they would look for potential future growth to provide handsome profits and returns on their investment. This is why it is important to have a clear and well-designed plan for the growth of the business and how it can be achieved in the future. You must be able to demonstrate the potential for growth through actionable plan and not just words. If the buyer sees the potential for growth then he or she is likely to shell more for the purchase of your business, which is obviously beneficial for you.
To ensure that you make modifications to your business for making it more attractive to the potential and avoiding the common pitfalls, you must hire the services of a professional business broker San Diego such as So-Cal business brokers. Before hiring the services of these brokers, you can get in touch with the company professionals or read the different resources provided by the company for a better grasp of their services.
