Increasing the valuation multiple

The main goal of many business owners is to build a business which they will eventually sell or pass on to family members. Therefore, building and increasing business value is an important consideration as you run your business and when you’re making major business decisions.

It’s not unusual for business owners to have unrealistic expectations about their company’s value. Business owners often overlook placing importance on all the key areas that increase business value until too late in their business lifecycle.

Rome wasn’t built in a day and business value can’t be increased overnight. You need a long-term value strategy.

Focusing on key areas that build intrinsic value will not only improve your business day to day
but will also dramatically affect how your business is perceived by potential future buyers
and increase its value in the long-term.

In this guide we will cover the key areas that drive and increase business value

Increasing the valuation multiple

Many business valuation methods use a multiple of earnings
approach to calculate the value of a business. A higher multiple will
be achieved when a buyer attaches less risk to the ability of the business to maintain its earnings into the future.

The multiple used therefore has a significant impact on the value achieved for your
business – but there is no scientific formula or calculation used to determine precisely the ‘correct’ multiple.

You’ll negotiate this with the buyer. External factors will influence the multiple – such as the
type of industry you operate in - but many internal factors, within your control, will also be instrumental in determining the multiple.

All the value drivers in this guide will affect the value multiple that your business sale achieves.