7 Items That Affects A Company
Value, Other Than Profitability
several factors beyond profitability that can affect the value of a
business. By minimizing the perceived risks—operating, financial, market,
and legal—this will lead to maximized value.
1. Strong management.
Senior positions staffed with proven professionals give buyers confidence.
Implement employment contracts, non-competes, successor plans, and equity
incentives. Recognize talent shortcomings and seek out appropriate
2. Customer diversity.
When no one customer accounts for more than 5%-10% of a seller’s revenue,
it’s a positive factor. Alternatively, long-term contracts with primary
customers are also attractive.
3. Contractually recurring revenue.
Maintenance contracts, service agreements, and licensing fees are future
revenue streams buyers like to see, as are sole-source agreements and
4. Robust IT and financial reporting systems.
5. Propietary Elements.
The market rewards proprietary products, unique operating processes, or
value-added services over commodity-like alternatives. They are key
differentiators and demonstrate a competitive advantage.
6. Intellectual property and brand equity.
Patents, trademarks, and recognizable brand equity can positively impact
value. Legally secure the rights to assets. Ensure intellectual property
licensing agreements have been well managed.
7. Professional financial statements.