Business Development | Business Valuation
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BY COLIN RITCHIE Business Development Helping Small Business Owners To Unlock the Profit They Deserve Business Development, Business Valuation, Profit Improvement, Business Leverage
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Business Development | Business Growth | Business Valuation www.inverellbusinesssolutions.com.au Do you think that your business is running at it's full potential? It is an interesting thought. what if could develop your business and it could perform just 10% better, You may find that this could add as much as 40% to the value of your business. And that 10% improvement could actually lead to an increase in profits of substantially more than 10%. If that was say a 20% lift in profits that you will benefit from anyway, then it's a 60% total return. So do you think your business could do just 10% better? Let me explain further... Businesses are usually valued based on their future profitability. What I mean is that a buyer will look at the business and say, are profits likely to continue at their current levels? Now that profit is a mix of two things: 1) The owners wage for running the business 2) The return on the investment in the business. Now mostly a buyer won't pay you for buying a job, but they will pay you for a return on the investment in the business. So from that profit they will then deduct a reasonable owners wage to work out the return on their investment in the business. From there they will decide what payback period they want to get their investment paid back in. Then the business valuation will be the ROI times the payback period Let me explain now with an example; Say your business has these numbers Increase by 10% Sales $500,000 1% $550,000 Cost of Sales $300,000 $330,000 Gross Profit $200,000 $220,000 Less Overheads $120,000 $120,000 Profit $80,000 $100,000 Profit $80,000 $100,000 Less Owners Salary$50,000 $50,000 Return on Investment$30,000 $50,000 Payback period of 4 years Value@25% return $120,000 $200,000 Increase by 10% Sales $500,000 1% $550,000 Cost of Sales $300,000 $330,000 Gross Profit $200,000 $220,000 Less Overheads $120,000 $120,000 Profit $80,000 $100,000 Profit $80,000 $100,000 Less Owners Salary $50,000 $50,000 Return on Investment $30,000 $50,000 Payback period 4 years $120,000 $200,000 Extra Business Value $80,000 In this example that 10% extra in sales has given a great increase in profit and resulted in a significant increase in business valuation. Earn the extra profit and get paid multiple times Sounds pretty good to me.. How does it sound to you? If you want help on achieving this with your business, contact us and let us help you. This has been Colin Ritchie for Inverell Business Solutions. Inverell Business Solutions 0267223115 http://youtu.be/buFmRvzidqM
Transcript of Business Development | Business Valuation
BY COLIN RITCHIE
Business Development
Helping Small Business Owners To Unlock the Profit They Deserve
Business Development, Business Valuation, Profit Improvement, Business Leverage
Disclaimer
Business Development, Business Valuation, Profit Improvement, Business Leverage
Any figures provided in this presentation are an example only and in no way professes to be a valuation of your
business or to be the correct methodology to value it .
To get a business valuation you should consult a suitably qualified professional
Business valuation
Businesses values are usually valued based on future
profitability Business Development, Business Valuation, Profit Improvement, Business Leverage
Business Valuation
Total Business Profit = Salary + Return on Investment
( ROI)
Business Development, Business Valuation, Profit Improvement, Business Leverage
Value of a Business
ROI X Payback Period = Business Value
Business Development, Business Valuation, Profit Improvement, Business Leverage
Example
Your Business
Sales$500,000Cost of Sales $300,000Gross Profit $200,000
Less: Overheads$120,000
Profit $80,000Business Development, Business Valuation, Profit Improvement, Business Leverage
Example
Business Profit $80,000
Less: Owners Salary$50,000
Return on Investment $30,000
Pay back period 4 years
Value of Business $120,000
Business Development, Business Valuation, Profit Improvement, Business Leverage
Example Increase Sales by 10%
Your Business Before Lift by 10%
Sales $500,000$550,000Cost of Sales $300,000 $330,000Gross Profit $200,000 $220,000
Less: Overheads $120,000$120,000
Profit $80,000 $100,000Business Development, Business Valuation, Profit Improvement, Business Leverage
Example
Your Business Before After
Business Profit $80,000$100,000
Less: Owners Salary $50,000$50,000
Return on Investment $30,000 $50,000
Pay back period 4 years 4 years
Value of Business $120,000$200,000Extra Business Value $80,000Business Development, Business Valuation, Profit Improvement, Business Leverage
Example
In this case:
10% extra sales = 40% extra business valuation
Business Development, Business Valuation, Profit Improvement, Business Leverage
The Power of Leverage
Earn the extra profit and get paid multiple times
How does that sound?
Business Development, Business Valuation, Profit Improvement, Business Leverage
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Reserve your 30 minute complimentary meeting today!
Business Development, Business Valuation, Profit Improvement, Business Leverage
