A common and compelling question for business owners is: how can you improve both the value and salability of your business? While many understand how to tweak financial metrics like revenue and expenses, the deeper factors that drive true business value can often feel elusive.
Understanding Value
The cornerstone of a business’s value is its recasted earnings. Business owners often aim to reduce taxable income, but recasting—a process that adjusts financials to remove discretionary expenses—is vital for understanding true cash flow. Recasting provides a clearer view of what the business genuinely generates, independent of its current ownership. The formula is simple: higher recasted earnings lead to a higher valuation.
Other contributors to value include revenue size, growth trajectory, and industry outlook, but recasted earnings typically carry the most weight in determining worth.
The Art of Salability
Value might be measurable, but salability depends on how appealing your business is to potential buyers. It’s the “wow factor” that makes a buyer want to choose your business over another.
Key factors that influence salability include:
Owner Involvement: A business overly reliant on its owner is less attractive to buyers.
Financial Transparency: Clean, well-documented financials build trust and confidence.
Curb Appeal: Both physical and online presence matter—buyers are drawn to businesses that look successful.
Industry Outlook: Strong or stable industries are more enticing than those facing decline.
While features like a catchy business name, prime location, or sleek office spaces may not directly impact valuation, they play a significant role in enhancing salability and market appeal.
Ready to Boost Your Business’s Market Potential?
Whether you’re ready to explore your business’s true value or improve its salability, we’re here to help. Call us today at 330-650-9000 to start the journey toward maximizing your business’s market position.
