8 DRIVERS OF COMPANY VALUE

There are many factors that come into play when determining the value of a business. The most obvious ones being your finances. But there are a lot of other factors that add to the value of your company. When evaluating a business, GW Business Valuations take a variety of factors into account to determine the value of your business. These are the main factors that drive a company’s value.

Financial Performance

This is an expected factor. Your business’s history of producing revenue and profit is a major factor in your company’s value. Your financial performance is used to analyze the history of your company’s growth. The attention to detail and consistency of your record keeping is also an important aspect of your financial performance.

Growth Potential

It is important to see the likelihood to grow your business when determining its value. Your growth potential may consider your business’s ability to grow regardless of its industry or it may consider your business’s growth potential based on the industry. If your company or industry has the potential to grow, the value of your business will increase.

Switzerland Structure

The Switzerland Structure looks to find how reliant your business is on something or someone with the goal to be completely neutral. As a business you want to not rely on something so much that if it becomes unreliable or goes away, your business will still be viable. You want to not put all of your stock in one client or employee. If your business is too dependent on an employee, customer, or supplier, that will decrease the value of your business. If you are more neutral, the value of your business increases.

Valuation Teeter Totter

The Valuation Teeter Totter is a term to describe if your company is a cash spigot or a cash sucker. Ideally, your business with be taking in more money than it is spending. This aspect of a business valuation looks to find where your business lands on the teeter-totter and how it leans. If you are spending a majority of the money you are taking in, your business’s value will decrease.

Recurring Revenue

This factor looks at your recurring annuity-based revenue that your business collects each month. If you have stable revenue coming in each month, that means your business is doing something right. During a business valuation, your recurring revenue is looked at to help determine the financial health of your business.

Monopoly Control

What does your business have a monopoly on? Monopoly Control looks to find what is unique about your business and what differentiates your business from competitors. The uniqueness of your company can play a major factor in determining your business’s value.

Customer Satisfaction

A company’s reputation is immensely powerful. This aspect of the valuation looks at the likelihood that your customers will repurchase. It also looks at their chance to refer your business to others. If your customers are likely to repurchase and refer you to others, your business value will increase and your business will grow.

Hub and Spoke

Hub and spoke is similar to the Switzerland Structure. While the other factors that define your business look at its potential for growth and its current model, Hub and Spoke looks at how well your company can run without you. If you were unexpectedly unable to work for three months, how would your business perform? Is your business to reliant on you? You want your internal structure to be healthy enough that if you were removed from the equation your business would still be able to run successfully.