Dhruv Mehta July 4, 2020 Business Valuation has paramount importance when you want to display the board of “Business is for Sale” to the world. As an entrepreneur or business owner, it is your responsibility to showcase the business valuation to the potential buyer. Before showcasing it, you need to conduct one.
However, there are various factors that can come into the picture before performing the business valuation process.
- Asset value
- Liabilities value
- Share price
- The outstanding amount to be paid to suppliers
- Any pending salaries to be paid to employees
- Political or Environmental scenario
These are just a few direct factors that can impact your business valuation. In a practical situation, there are more direct and indirect factors that can adversely impact the process.
Consider one scenario. You did the business valuation and find out that the value is lower than that you expected. Now, at this time, you already advertised about selling your business and people are quoting their buying prices during the interaction. So, considering no time gap between these two events, you have to sell the business with price decided on the lower valuation amount.
To avoid this situation, you can prepare one business exit plan, and based on that, conduct a business valuation. If you find out that the valuation is not as per your expectation, you have a fixed time interval between valuation and sale. Now, you can take some measures as described below to boost the valuation of your business and then proudly sell it out at your quoted amount.
1. Conduct Business Valuation Under Current Circumstances
Before going to research flaws in current business practices and methodologies, it is mandatory to identify the current valuation of the business.
The important question here is: how to carry out the valuation?
There are certain methodologies you can follow for conducting a current valuation.
-
Calculating Net Asset Value
Finding out total asset value and then subtract the liabilities from it to reach net asset value.
-
Based On Revenue
Find out the annual revenue and with the help of stockbroker, identify the revenue of the identical business of your industry for a predefined level of sales.
2. Redo Market Research And Redefine Target Segment
Sometimes, it’s possible to have the wrongly defined market segment and the valuation will get adversely affected at the end. For this, the real culprit is market research. Normally, you select your target segment based on your market research. If you conduct certain mistakes while carrying it out, you might end up getting reduced sales numbers and the direct impact will be on valuation.
Also, with faulty research and the wrong segment, you will be calculating the inaccurate probability of potential sales and market share. For scaling up of business, you need to make sure about having no glitch in the foundational framework.
3. Stand Out From The Competition
In the past, if you have remained present in the product development meetings, you might have heard the name of Competitor Analysis. It’s a core marketing terminology and widely used when you want to enter the business or want to diversify in terms of product type or industries.
Within the competitor analysis, you can find out many identical players from your industry and start identifying their strengths and weaknesses. Based on that, you can find out the areas where your business can focus more and make improvements accordingly.
Another important aspect of becoming unique is your business’s USP (Unique Selling Proposition). All the things are connected here. When you will be able to advertise your USP in front of your target audience, you can create your distinctive identity in the market by taking the first step towards business growth. Moreover, you need to focus on the value proposition while delivering products or offering services. This additional value can make you stand apart from your competitors and can be used as a lethal weapon while arguing with potential buyers on why you are charging a higher amount for your business!
4. Invest In Website Design Changes
The website is the main entry point of your first-time visitors and loyal fan base. If the design is not updated continuously as per the trends, you need to face several negative consequences of it. In certain situations, either you need to learn web design skills to make changes or you can hire force from Upwork or Freelancer portal.
You can work with web designers on an improvement plan to change the UI (User Interface) of the website.
5. Major Changes To HR (Human Resource) Policies
Business valuation is directly connected with your human resource. The more skilled and efficient your company’s employees are, the effective valuation you will receive at the end. To achieve this, you need to focus on reducing the attrition rate by offering stock options to higher management and working on reward programs for skilled employees.
Money can’t attract everyone to stick with your company. You need to develop skill-focused training programs for employees of all the organizational levels. The HR team can take feedback from employees only to decide the skills they want to learn in the future. These are the changes management can make in HR policies.
Final Words
Frankly, it’s not possible to cover all the improvement points that can help you to boost your business valuation. Based on the nature of your business and certain hidden factors available at the time of sale, you need to adjust the above-mentioned strategies accordingly.
Business & Finance Articles on Business 2 Community
(16)
