What is Your Company Worth?

Before you list your company or speak with potential buyers, it’s important to know what your business is really worth, and what factors can raise or lower that value.

Factor 1: Discretionary Expenses Can Hide Your Real Profit

Buyers care about one thing: If I take over this business, what’s in it for me?
Profitability is at the center of that question.

Many owners include discretionary expenses in their books, perfectly legal but not essential to running the business. These can make your company look less profitable than it actually is. Examples include:

• A “business trip” to a desirable location that’s more vacation than conference
• Overpaying family members or hiring them for roles that wouldn’t exist for a non-family employee
• High-end vehicles or perks that aren’t necessary for day-to-day operations

When you're getting ready to sell, these discretionary expenses can create confusion and reduce buyer confidence. Even if you explain them later, not every buyer will give those adjustments credit. And lenders almost never do—they go strictly by what’s on your financial statements and tax returns.

If you want top dollar for your business, start early.
Reduce or remove unnecessary expenses in the years leading up to a sale so your financials clearly reflect the true earning power of your company.

A strong valuation starts with accurate, transparent numbers.

Stay tuned for more insights on the 13 key factors that determine what your company is worth and how quickly it sells.