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Hi, great points for establishing the value of a business for sale. Here are a few key drivers of business valuation:


The better professional business valuers consider the following factors when valuing a business:

MARGIN. The greater the positive difference between all business costs and sales, the more valuable is a business.

GROWTH. A growing business has a higher value than a business that is static or in decline.

ASSET UTILIZATION. A business that uses the least amount of assets and uses them efficiently is more valuable.

FINANCIAL ENGINEERING. A business that actively seeks to optimize its weighted average cost of capital (WACC – the mix of equity and debt funding the business carries) and minimize its working capital is more valuable.

RELATIVE BUSINESS RISK. A small business that is comparatively less risky when assessed against the business risk factors is more valuable.

Business valuation calculation can be quite complex when selling a business, in-fact a small business can have more than one value depending on the buyers or vendors perspective.

For example, a business can have a different value to an owner-operator buyer than it does to an investor buyer, or to a competitor wishing to expand, or to a supplier or customer wanting to vertically integrate. Unfortunately, it can also have quite a different value again to a liquidator!

Information is vital to get all areas of the business taken into account which impact the valuation.

Free tips for valuing your business can be found here:

‘Insider Tips for Selling Your Business’