So what is "Expected Future Earnings" worth? Well, that depends on factors such as how predicable the earnings are, how long the projected sales will be sustained, level of risk, size of existing company, anticipated earnings from growth, etc.
Revenue is a strong indicator, but profitability goes hand in hand with it. don't let anyone tell you differently. With revenue say your company sells $100, 000 per year, that is basically a $100, 000 per year revenue stream. Quite often businesses are valued on a multiple of revenue. The multiple generally depends on the industry so you may need help with that. But so you know what you are talking about, multiplied by two is called a "two times sale", by one is called a "one times sale" etc.
This multiplier is heavily altered by profitability. A company could do $3 Billion in annual sales, so would it be worth $3 Billion? Obviously not.
So what are the factors you can work on first to most dramatically increase the value of your business? That's right, revenue and profitability. This is where a SWOT analysis is vital. If you haven't already had one. Our team will do one free of charge. Again, elleven marketing group changes zero dollars for this service. It identifies Strengths, Weaknesses, Opportunities and Threats. Then we know what strategy you will need to put in place to bring up your revenue and profitability. Don't call a broker until you have a plan and know where you are going. Most won't give you the time of day. If they do, you will most likely not get as much for your company as you would otherwise. It is better to sell a remodeled house that operates well and it is better to sell a remodeled business.
Written by Samuel Sadler of elleven marketing group
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