How to Influence Your Company Valuation, Part 2

There are several ways to accurately calculate the value of a business you intend to sell or buy. Many scenarios—on and off the balance sheet—can negatively or positively affect valuation. The valuation of your business is determined by a combination of Cash Flow Factors and Risk Factors.

Below are specific takeaways you can immediately implement to increase valuation while also reducing risk. Missed Part 1? View it here.

PART 2: Risk Factors that Impact Your Valuation

1. Customer Concentration

Reducing your dependence on any one or two customers minimizes risk and adds value.

2. Industry Concentration

Many industries cycle, and a company’s ability to diversify cyclicality risk enhances value.

3. Management Team

Buyers are interested in acquiring talent that is capable of operating the business and maintaining
customer relationships.

4. Regulatory Risk

Government regulations create opportunity and risk. If a pen stroke by a politician can severely impact
your business, find ways to diversify.

5. Foreign Currency Risk

If fluctuations in value of the dollar will materially impact your profits, hedge appropriately.

6. Project-Based Revenue Risk

Recurring revenue trumps project-based revenue. If the nature of your business is project-based, track and build a pipeline.

7. Obsolescence Risk

If you have the risk of a key product or service becoming obsolete, seek additional revenue streams.

8. Information Risk

Use credible security vendors to demonstrate that you prioritize protecting your client and business data.

9. Financial Statements

Transparent records substantiate claims of successful performance and support a higher valuation.

10. IT Data & Reporting

The ability to produce information on customers, suppliers, employees and products adds credibility to the story of your business.

To discuss your current range of value and likely buyers or investors, please contact us for a complimentary Market Value Assessment. Download this information as a PDF by clicking the image below.

Valuation Factors PDF

Engage An M&A Advisor

Contact Us

Sign Up To Receive Nolan News

FINRA Licensed Broker Dealer Affiliated

Nolan & Associates’ commonly owned affiliate, Middle Market Transactions, Inc. (MMTI), is but one of a very few FINRA licensed broker dealers serving business owners in the middle market.

Securities offered through Middle Market Transactions, Inc. Member: FINRA/SIPC