Business Valuation Blog | Understanding Buying / Selling a Company

Valuing a Growing Company: Get the Most for Your Business' Potential

Posted by Business Valuation Specialists LLC on May 31, 2017 1:07:00 PM


When you've worked hard to position your business for expansion, it's really difficult dealing with people or organizations that don't value that hard work. When you need to get more for your business' potential, you need a partner who can ensure that you're getting everything your business is worth, both now and in the future. Valuing a growing company can be a difficult prospect, but it is well worth the effort involved when it's time to sell your business, merge with another company or partner with other concerns in your area or industry.

Valuing a Growing Company: Get the Most for Your Business' Potential

It could be caused by a new market expansion. Perhaps there's just more demand in your sector than there has been in the past. Commodity prices could be skyrocketing, making prospective buyers come out of the woodwork. Whatever the reason, your company is growing and you want to realize the full potential of that growth. Where do you go to make that happen?

Many business owners take a few specific directions when trying to value their growing business. They discount the value of that growth, settling for a low selling price or otherwise receiving less consideration for their company's growth potential. They overestimate the growth value, leaving the company to grow stagnant while opportunities pass them by. The third option is to get a company valuation from a business appraiser who has experience in that particular industry and with growing companies in general. But what does that appraiser base the company's value on? Here are a few areas they typically consider:

  • Future Earnings: How much is the business projected to earn over the next few years? If it's significantly higher than in the past, that needs to be taken into consideration when determining business value.
  • Market Conditions: Is the market hopping, with every business within that sector seeing strong returns? If so, how long is this trend expected to continue? Much like the housing bubble and the dot-com crash, many trends may change, though strong companies that are well managed through a down turn may expect to see a stronger market share in future upswings.
  • Innovation in the Industry: Is your business seen as a leader in innovation or does it create the same basic items or services that every company across the industry seems to produce? If you have a history of innovation, it can be expected that your growing company will continue to see strong growth, fueling a higher value.
  • Goodwill and Reputation: Does your business have a reputation for excellence in the industry? A good reputation can make a huge difference between average one-time sales and loyal, committed customers who come back for your services and products time and again. Though today's shorter attention spans make this process harder, it's an excellent indicator of future potential.

The work you've put into your business to prepare for expansion and take advantage of opportunities as they've arisen deserves to be recognized and rewarded, and valuing a growing company is a great way to document that growth. This also lets you to take advantage of future earnings beyond what normal business operations may provide, allowing you to benefit from the course you've laid in place for your company that will lead to its continued future success. 

Tags: valuing a growing business, valuing a growing company

Changing Values: How Valuing a Growing Business Helps Monitor Growth

Posted by Business Valuation Specialists LLC on Sep 21, 2016 9:30:00 AM


When your business is thriving, it's easy to get caught up in the rapid pace of a successful business. But we've all seen situations where a very successful business suddenly failed because the managers and executives didn't know valuing a growing business was important to stave off problems that would show up down the road. How does the valuation of a company help your growing business remain successful? Here's a quick look at how business appraisals can be used to develop dynamic insights that assist comprehensive business planning.

Changing Values: How Valuing a Growing Business Helps Monitor Growth

A company valuation provides insight into your business' growth through a few different mechanisms. These mechanisms look at your business' internal values, comparisons to similar businesses and across the industry as a whole. Here's what the appraiser is looking at:

The Business Itself

Your business is unique in its own way. It has different practices than other businesses. You have specialized knowledge for getting the job done. A good business appraiser is aware of that and will  look at your entire business. Because a professional appraiser only works on valuing businesses, they can tell you where you may not have enough cash in the business, too much of your assets tied up in equipment or whether the investment you're making is a great deal or a terrible risk because of the cash flow situation.

Comparison to Other Businesses

How does your seafood restaurant compare to others in the market? Because business valuation specialists spend their time valuing businesses, they can quickly see factors that you're not taking into account. How does your revenue and earnings stack up against similar companies?  

Statistical Comparisons

A good part of this process is using ratios to compare your business growth to that of other businesses, both locally and across the country. They can be used to determine ROI on both assets and equity. They can also be used to calculate safety and liquidity, a current ratio, a quick ratio, debt to equity and sales versus working capital, along with others.

Industry-Wide Comparison

There's also a focus on the industry as a whole. Even if you're still selling oil pipeline, the oil industry may be going into a serious slump. That means you could be facing a cash flow and market crisis shortly. A good business appraiser will look at the industry as a whole and your part within it to help you project where your business will be going in the future. 

As you can see, valuing a growing business gives you great insights into what you need to do to continue that growth curve. But don't use just any appraiser, make sure you're working with a certified business appraiser who has the experience to calculate a comprehensive business valuations for your business. Don't have one to work with who is familiar with your industry and experienced in the type of business appraisals you need done?

Tags: business value, valuing a growing business