In the latest episode of Jake Johnson’s (President of the Johnson Consulting Group) “M&A Minute” video series, Johnson talks about the top 5 things that can affect the value of your business.
Labor Mix
It’s important to have hard-working and passionate employees in your corner. A successful business is run by people with a variety of skills, experiences, and knowledge that comes with how long they’ve been employed. “A strong business has a multigenerational staff with varied talents and co-workers who cross-train to share skill sets,” says Johnson. If a business is being inherited then it’s important to have a strong team to manage the day-to-day.
Size of Your Business
“A business that brings in many millions of dollars per year is worth more than a smaller business,” says Johnson. While this is true, it’s important not to devalue smaller businesses. Depending on market conditions, local demand and competition, it may be easier to sell a smaller business.
Location
Location, location, location! It’s all about real estate. Just like the housing market, it’s important to understand that the geography of a business directly impacts the value. In order for a business to flourish it’s important to be located in a populated area with opportunity to succeed. “This varies from state-to-state, but even regionally, business locations can be graded on their location,” says Johnson.
Interest Rates
When interest rates are low, a buyer can pay more for a business. This is great for both buyers and sellers. Low interest rates means there is a greater pool of potential buyers who can afford more properties.
Credit Ratings
Credit scores and ratings are extremely important when it comes to valuing a business. When lenders are willing to let you borrow money, that means the business has been run well, and it’s lucrative enough to pay bills on time. This is why it’s so important to make sure your house is in order prior to thinking about selling your business. Johnson Consulting Group has expert consultants who can help you grow your business or plan your exit strategy. Check out our blog that talks about planning your exit strategy.
Jake Johnson and the Johnson Consulting team created the M&A Minute to help business owners through the process of buying or selling a business. The M&A Minute utilizes Jake and the JCG team’s knowledge to give advice that helps individuals feel confident and at ease when going through one of the most important times of their lives, selling or purchasing their most valuable asset. The M&A Minute is released every other Thursday. You can watch episode 9 now. Follow us on Facebook, LinkedIn, and Twitter to get M&A Minute updates.