Increasing Value of Business
Price is what you pay. Value is what you get.
Warren Buffett
We know that many business owners view their business as their retirement fund or at least want to get a 'lump sum' from the business. The investment of many years of your life is locked up in the business and we can help you make sure that you maximise the return on that investment.
We do it by using the proven processes developed in our Entrepreneur Cultivator™
An important part of exit planning is maximizing the value of your business. Like preparing for anything this takes time, the optimum time we would say is 3-5 years.
There are many ways to value a business, most are based on some measurement of past profit and a determination of what that profit is worth in 'today's pounds'. Most business valuations involve an assessment of:
- the industry in which the business operates
- the business risks and future prospects
- the profitability, cash flow and financial position of the business.
The most commonly used valuation methodologies are:
- liquidation or net realisable value
- discounted cash flow (net present value of projected future cash flows)
- capitalisation of future maintainable earnings
- investment value
Liquidation or Net Realisable Value
This is basically like a fire sale when all you get is the value of the saleable assets and there is no allowance for goodwill or potential earning.
Discounted Cash Flow
This is an accounting method based on projecting future earnings and is often used for start up businesses where there is a good idea or patent which has value. Valuations for investment from venture capitalists are normally developed in this way. Since forecasts are just that and can be unreliable, this is not a very popular method of valuation.
Capitalisation of Future Maintainable Earnings
This method is very suitable for stable businesses which are not likely to change much and have predicable profit levels.
Investment Value
Increasing the value of your business will involve making sure it can run without you, and that everyone in your team is performing to their optimum. We will work with you to help you achieve this.