Key Driver to Increasing Value and Marketability of a Business

Posted on February 20, 2010 · Posted in Blog

The key driver to increasing the value and marketability of a business is the predictability of the future cash flows of the business. Uncertainty increases risk and increased risk means a higher expected rate of return for the buyer.

Predictability of earnings is a function of past history and future projections that are based on logical assumptions. Companies that show steady growth, low client turnover, a strong brand, reoccurring revenue, long term contracts and other factors that decrease the risk of future cash flows will receive higher value and standout in the market place.

There are many ways that business owners can take the risk out of their future cash flows and increase the value of their business. Simple things like having sales reps sign non-compete agreements, giving clients discounts in exchange for long term contracts, trademarks, patents and even just having a customer survey to provide feedback can significantly reduce risk and increase value.