A good business appraisal factors in a wide range of variables to determine a company’s value. Some examples of indisputable records to factor in are comparables, projections, EBITDA multiples and discount rates. It is important for a business appraiser to understand the purpose of the appraisal before beginning the process. Often times appraisers are unaware of important factors that could enhance or devalue a business’s worth.

There Can Be Unwritten Value

Many factors can determine value. Prospective buyers may be looking at variables such as depth of management, profitability and market share. However, there can be more that determines value.

When determining value, consider these factors:

How much market competition is there?
Are there a variety of vendors?
Does the business have potential beyond its current niche?
What is the company’s competitive advantage?
Is pricing in line with the demographic served?

These are some of the key questions to consider when evaluating a company.

There Are Ways To Increase Both Valuation And Success

A successful business is customer focused and has company-wide values. Brian Tracy’s book, “The 100 Absolutely Unbreakable Laws of Business”, notes that it is critical for businesses to have a company-wide focus on these three key areas: marketing, sales and revenue generation. He also points out that trends can be the single most vital factor to any company’s success and, ultimately, valuation.

No Replacement For Understanding Trends

A company needs to understand trends. Trends help us to understand both the market as it stands today and as it may be tomorrow. Savvy business owners strive to capitalize on the mistakes of their competitors while simultaneously learning from their competitors’ successes.

Tracy states that there are many variables in determining value. Finding and retaining the best people is utterly essential. One of the greatest assets any company has is its people.

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AUTHOR: EBIT Associates, Ltd.
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