Why Some "Ordinary" Businesses Sell for High Price?

2misi.com

Certain businesses command an enormous multiple regardless of the business's size. There are certain fundamentals that any business can have which will increase its value when the time comes to sell. These include:

• Clean books and records
• A reasonable selling price
• Good terms, including seller financing
• A proper transition period to a new owner
• Non specialized skills required to run the business

These are all things that any seller can work towards implementing so that they ultimately get a higher price.

Recurring Revenue:

Any business that has a built in revenue base will command a higher selling price. It's a whole lot more enticing for a buyer to know that they will have and immediate and locked in long term revenue stream the day they get the keys to the business.

One of the most challenging aspects to business is when you have to "go into business everyday." When you have a company whereby there are contracts in place, written or verbal, that provide you with a base income every month, it's a huge benefit.

The concept of recurring revenue is not only attractive; it just makes good business sense. It's far easier to expand a business knowing that you have a base to work from everyday. It's also a lot easier to sell additional products or services to a customer who is already buying from you.

 

Limited Specialized Knowledge

Any business where a new owner with general business skills can take over and run will improve the value versus ones where specialized knowledge, experience, licensing, etc. is required.

While some businesses command massive premiums, the potential growth may be limited. However, the downside risk is far less than other types. Also, these lend themselves to absentee run situations which make them even more attractive to some. On the other hand, if you have entrepreneurial blood running through you veins, you'll probably be bored with these particular types and so there are many other options available to you as well.

http://www.2misi.com/article/2012/06/why-some-ordinary-businesses-sell-for-high-price