Key Attributes of a Valuable Business

When looking to value a business for sale purposes, a seller should look at it objectively through the eyes of the potential buyer. What strengths and opportunities are identified? Conversely, what action can be taken on potential weaknesses and threats? Below are further examples of the key valuation issues to consider:

• Clear objectives. Creating a valuable business is essentially about taking strategic decisions that have a lasting, positive effect. In order to achieve this, a business must have clear objectives and a plan to achieve these.
• Good people and products. These represent the essence of a business and form a fundamental part of its strength. Does the business have a unique selling point, setting it apart from its competitors?
• Strong track record. Proven businesses with a strong track record developed over time often have a higher value. However, value, as discussed above, is also very much about growth potential.
• Profitability. Clearly potential buyers are looking for a return on their investment. High gross margin plus good levels of cash generation from profits for example reduce the risk of an investment going bad.
• Security. Generally relatively stable businesses are more valuable as they offer more security to the potential buyer. The nature of the underlying business assets can also be an important influencing factor here. A strong balance sheet with well-managed working capital does add value, as does a good quality customer base.