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Managing Business Value

For those of you whom have businesses, and are wondering how much the downturn in house values will impact on the value of your business, you can be reassured, that at present there is little correlation between the two. In many countries there has been a significant increase in demand by potential buyers in the past six months, indicative that investors are looking at other options to invest tehir money where they can gain better returns than those currently coming from residential and commercial real estate.

Many businesses are concerned that the price they receive for their business with the downturn, yet historically business values have proven not to fluctuate as much as most people perceive them to. This is due to the way in which businesses are valued.

For goods businesses with sound systems and processes, one can expect a fair price now. However, since businesses such as these are based on the revenue or profit generated over the previous three years. Business owners may be better off selling now than in a few years time, if the product types they carry are those likely to suffer most during an economic recession. Some products are actually selling more during this time.

For service businesses, a different type of valuation applies, based on a combination of client base, revenue generated and the value of the intellectual property [IP] developed and/or held by the company.

If you are seriously considering selling your business, now is the best time to start planning, and getting advice from a trusted business broker. Demand is high and you still have a good solid 3 years past trading to rely on.