Business valuation

Why it's important to know your company's value

Determining the value of your business provides clear insights into current performance, financial health, and growth potential. This valuation is essential when considering corporate mergers, acquisitions, or strategic decisions, such as investments. It helps business owners set realistic goals and develop effective business strategies.

Furthermore, an accurate valuation serves as a basis for negotiations with investors, potential partners, and even when attracting talent. Being aware of the value of your business allows you to effectively seize market opportunities and strengthen your competitive position, leading to a solid and competitive position in the business world. In short, knowing your company's value ensures a successful future for your business.

How business value is calculated

There are various methods to calculate a company's value, depending on multiple factors such as the nature of the business, sector, financial data, and the purpose of the valuation. At Marktlink, we generally use two methods: the Discounted Cash Flow (DCF) method and the Earning Multiple Valuation. With the Discounted Cash Flow (DCF) method, we project what the business will earn in the future and convert that to its present value using a discount rate (the rate used to determine present value). The Earning Multiple Valuation calculates the business value based on two fixed factors: EBITDA and the multiple. The multiple is the factor by which earnings before interest, taxes, depreciation, and amortisation (EBITDA) is multiplied. Our specialists determine which method is most suitable for each specific business.

Based on the multiple method, we have developed the Marktlink Multiple, a unique business valuation calculator based on more than 1,000 deals, 40,000 calculations per year, and current market and sector developments. The tool provides you with a reliable estimate of the value of your business within one minute. As a business owner, you are undoubtedly interested in this. The Marktlink Multiple is entirely without obligation.

Increasing the value of your business

As a business owner, you can increase the value of your business. This value is determined by your ability to achieve and maintain financial results in the future, regardless of future changes. There are various factors within your company that can impact its valuation and need to be sorted out to be able to adapt to changes, such as:

• Profitability
• Future potential
• Market position
• Competitive advantage

To increase the value of your business, start by developing a clear and realistic growth strategy. Before determining this strategy, it's essential to conduct a thorough business analysis. This allows you to identify areas for improvement and begin the process of optimization. You may conclude that you want to expand your product or service offering, grow your customer base, establish a motivated team or refine your business processes and strategies.

Other steps to increase the value of your business include:

1. Developing strong value propositions
   Develop a compelling value proposition for your products or services.
2. Scalability
   Make your business scalable, allowing it to adapt to periods of growth and contraction.
3. Independence
   Ensure your business is not overly dependent on one or a few individuals, as this poses the greatest entrepreneurial risk.
4. Marketing
   Invest in effective marketing campaigns to increase the visibility of your business.
5. Technology
   Implement new technological developments that enhance efficiency and improve overall business performance.
6. Market analysis
   Deepen your understanding of the market and customers and identify threats, strengths and weaknesses.
7. Optimising your business model
   Make subscriptions the foundation for your business model.
8. Information Systems
   Ensure that financial information, intellectual property, product compositions, customer data, and employee information are well managed.
9. Employees
   Ensure you have a competent and motivated management team in place and continue to attract talented employees.

Engage with an expert

A comprehensive valuation takes all these aspects into account to determine the actual value of the company. The weight assigned to each factor varies from one business to another, depending on parameters such as the size of the business, the industry, and specific circumstances. Increasing the business's value not only leads to long-term success but also prepares the business for a better valuation in preparation for a potential sale. You may not be planning to sell your business yet, but it's never too early to take proactive measures and prepare effectively. Keep in mind that increasing the company's value is a complex process, so it's advisable to seek the expertise of a specialist.