Critical Factors That Impact Company Market Value
Cash Flow and Profitability
A healthy business has adjusted net profit margins of 15%+ before 'owner add-backs'. This is very critical in the overall valuation of the business.
Client Diversification
Depending on a single customer for more than 20% of your revenue leads to higher risk in a company’s stability.
Revenue Growth
Increasing revenue growth year over year is vital. More than 20% revenue growth is outstanding, 10% is higher than average, 5 - 10% is average, 3-5% is acceptable, and less than 3% is concerning.
Recurring Revenue
All buyers put a valuation premium on reoccurring revenue because of the regular, predictable income stream it provides. A greater amount of service and maintenance work increases value.
Lead Generation Program
Having a robust multi-channel program that consist of wrapped trucks (branding), local advertising, email, and SEO to “keep the phone ringing” is critical.
Size of team and staff
With the labor and employment challenges everyone is facing today the size, quality and loyalty of the entire staff is of vital importance. In addition, the ability to recruit, train and retain is critical.
Marketing Reputation Management
Buyers want the number of reviews and “star” ratings to be strong. This supports digital presence and lead generation. Buyers want the ratings and reviews to be in place and not have to build or undo negative reviews.
Management Team Depth and Transferable Process
The business must be transferable and not completely dependent on the owner to operate successfully. This is true for sales, operations, client support, and strategy. There must be a scalable and repeatable process the new owner can assume.
