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Qualitative Factors in Selling a Business

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It’s obvious that buyers will first look at the financial factors of a business for sale, such as past and current profitability and trends. If a business isn’t profitable, it has no value beyond the value of its assets.

Assuming a business is profitable, it will have a certain value to buyers. The value, however, depends on the amount of perceived risk the buyer sees in buying the business, and the level of risk is determined by examining the business’s qualitative factors.

Several of the most important qualitative factors in selling a business are discussed on the Value Drivers page. Following is a list of other qualitative factors that can have an impact on the buyer’s perceived level of risk and the selling price of your business:

MANAGEMENT

  • Strength of management team / key employees

EMPLOYEES

  • Culture and employee morale/satisfaction
  • Employee turnover and length of tenure

MARKETING & SALES

  • Marketing effectiveness
  • Quality of sales techniques

BUSINESS IMAGE

  • Public reputation – online and offline
  • Visibility of corporate/business culture
  • Degree of business “Brand” value
  • Quality of website and marketing literature
  • Appearance of facilities

INDUSTRY & MARKETS

  • Position in industry & markets
  • Market share
  • Market diversification or niche
  • Recession resistance
  • Industry and market threats or challenges
  • Strategic alliances/partnerships

PRODUCTS & SERVICES

  • Unique, proprietary technology, products, and/or services
  • Intellectual property
  • Quantity and diversification of product/service lines
  • Quality and nature of supply chain

OPPORTUNITIES FOR GROWTH

  • Production/sales capacity
  • Scalability
  • Capability of adding new revenue streams
  • Potential new products/services
  • Potential new industries/markets
  • Existence of formal growth plan

SYSTEMS & PROCEDURES

  • Quality of information systems
  • Well-developed and documented systems and procedures
  • Employee manuals—policies and procedures

LEGAL

  • Corporate/organizational structure
  • Legal issues and exposure
  • History of, or pending, legal issues
  • Contracts: customers, suppliers
  • Facilities lease
  • Compliance with regulatory requirements

SAFETY & ENVIRONMENTAL

  • Safety manual
  • Safety certifications
  • Workers Compensation history and rating
  • Safety standards, procedures, programs, training

Business Valuation Report

It’s very easy to get caught up in all the formulas, industry standards, and different business valuation methods. That’s why we designed our ‘Business Valuation Model,’ which is intended to help the average business owner understand how business value is derived in a straightforward and logical way.

After providing more than 5,000 opinions of value over the past decade, we are well positioned to provide you with a comprehensive report on the value of your business. If you would like to know what your business is worth, contact us to order your business valuation report.

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