Did you know that up to 80% of an entrepreneurs net worth is typically tied up in his or her privately owned business? So how much is your business worth and what are some of the key drivers that determine market value.
A business valuation is a processed set of procedures used to estimate the economic value of a business.
Most owners recognize the need for transaction valuations.
These are done if you plan to sell, purchase or even re-finance a business.
Valuations are also used to determine the tax basis for an owner's estate and settlement in the case of divorce.
So do you need to wait for one of these events to have a business valuation? No.
Many business owners have them done for strategic planning.
In other words, to help them determine the driving factors to maximize future value.
Better data and information means better decisions.
It's a great business tool! 7 Business Value Drivers As a business owner, you have an emotional attachment.
That's normal.
But when it comes to business value, you need to look at it from a potential buyer's perspective.
Here are some factors that impact business value - in a positive or negative way:

1. Quality, motivated management team
2. Established, documented operating systems
3. Above industry-average profit margins
4. No reliability on any one customer or vendor
5. Attractive facility
6. Realistic growth strategy
7. Good and improving discretionary cash flow

Based on the drivers above, here's a few questions to ask yourself

• Is your business dependent on you - or a quality team with operating systems?
• Do you sell on value and/or uniqueness - or price with low margins?
• Are sales spread among a lot of customers - or are you too dependent on one or two?
• Do you have multiple vendors for all your critical needs - or too reliant on one supplier?
• Do you have a plan for growth? Is that growth sustainable in any economy or only during economic booms?
• Do you have consistent financial statements - and understand the numbers, trends and opportunities?

As a final thought, your reputation can also impact the perceived value.
Potential buyers will likely do an internet search.
Are you find-able by search engines? Is your website a positive reflection of your business? Do you have reviews from customers? Are you in the news and part of the community? You don't need to be ready to sell to make building value a priority for your small business.
It will pay dividends now and in the future.