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Are you in the right business?

A colleague of mine told me about an Estate Agent who is launching a new business because he is fed up with high staff, office, portal costs, the up and down market as well as the threat of a housing crash because of Brexit knocking the confidence of both agents and sellers. As well as this there are new online fixed fee agents.

He’s chosen a sector with these:

  • Very low fixed costs
  • High profit
  • Franchise potential
  • No barrier to entry
  • Overlooked because it’s not glamorous
  • Weak competition

What sprung to mind were the eight drivers of business value from the book Built to Sell – these are:

Financial performance

This is the businesses history of revenue and profits combined with the quality of record keeping.

Growth potential
The chances of growth of the coming years and rate of growth will affect the value.

How dependent your business is on any one employee, customer or supplier

Working Capital Requirement
This is the cash required to operate the business.

Recurring revenue
This is the amount and reliability of revenue you collect each month.

The better and stronger your differentiation strategy is, the higher the value of the business.

Customer satisfaction
The higher the customer satisfaction score the more likely it is that they will re-purchase.

The better the documentation in the business the less it will depend on the owner.

If you’re thinking of selling your business at some point and would like to discuss any of these topics get in touch.

Image from Flickr by Robert Couse-Baker.

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