Can You Tell me How Much My Company is Worth?
Q: Can you tell me how much my company is worth?
A: No, we cannot, and we will not. The value of your company will be determined largely by the market conditions at the time of your exit.
Real estate agents will often name a price that a house "might be worth" because they believe this optimism will increase their chances of getting the listing.
Business brokers have also been known to use this same technique.
They do this because they believe that naming a high number will make it more likely that you will choose them to work with you. But the final outcome of this sales technique is often a deeply disappointed and very angry client.
ExitReady does not trust people who name a possible sales price unless they are offering to pay it.
And neither should you.
Let's take a look at the factors that will determine the value of your business at the time of your exit:
These factors can be categorized as,
(1.) Macroeconomic
(2.) Business-specific
(3.) Industry-specific
Macroeconomic factors
Overall economic cycles, investor sentiment, and market conditions influence valuation multiples.
Low interest rates and low inflation generally lead to higher valuation multiples, as investors are more willing to embrace risk.
Companies within stable jurisdictions that have favorable regulations can also attract higher valuations.
Business-specific factors
Companies with established names and strong market positions are more attractive than companies that are less well known.
Larger, more profitable companies usually attract higher valuation multiples due to their financial stability.
Businesses with stable, recurring revenue streams and predictable cash flows are less risky and are often paid higher multiples.
Strong growth prospects significantly increase your company's attractiveness and, consequently, its valuation multiple.
Diversified product ranges, customer bases, and supplier lists reduce risk and lead to higher valuations.
A management team that is capable of driving growth and executing strategic plans is highly valued.
Buyers are willing to pay a higher multiple if they identify that your company would provide potential cost savings, revenue growth, or operational improvements to other companies within their portfolio. This is strongly enhanced by bundling.
Industry-specific factors
High-growth sectors tend to command higher multiples, while cyclical categories may trade at lower multiples.
The level of competition within an industry can impact your ability to achieve sustainable growth and, in turn, affect your valuation.
In essence, business buyers are willing to pay a premium for businesses that demonstrate a combination of strong financial performance, predictable cash flows, high growth potential, and a capable management team operating within an attractive business category.
Please don't let anyone tell you otherwise.
© 2025, ExitReady
