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3 Non-Financial Factors That Could Impact Your Business’ Value

Published

5 months ago

June 6, 2024

3 Non-Financial Factors That Could Impact Your Business' Value

Opinions expressed by Entrepreneur contributors are their own.

Determining a business’ value is not all about adding up revenue and subtracting expenses. While an important piece, these hard numbers are only half the equation for computing what a company is worth. To come up with the true value, we also look at factors like the level of owner involvement, company goals and growth opportunities. When we use the complete equation, we get a comprehensive picture of a business and can better understand the story of its past, present and future.

Calculations may vary depending on the company, but in a healthy one, there is about a 50/50 split between the quantitative (financial) and qualitative (non-financial) sides of performance. If the business isn’t profitable, it’s more important to focus on the quantitative side and fix the numbers first. Many owners don’t want to hear that, but if they’re not hitting their numbers, it may mean the business is not working. They must fix the quantitative issues before moving to the qualitative side.

For healthy companies that want to maximize their value, the qualitative indicators can be bundled into three main categories.

Evaluating quality

1. The owner’s goals

We’ve found significant research showing that if an owner has defined goals and plans for the future that are in line with market expectations for their company’s value, they’re going to have a much stronger exit. What is the owner’s defined goal for exiting the business — to get the most money, to take care of their employees and to ensure a legacy? You must then get to the “why” behind the goals and devise a plan of action. It almost doesn’t matter what the answers to the questions are; having achievable goals and a strategy for reaching them can increase the company’s value because it keeps the owner focused on improving the other areas of the business.

2. The owner’s role

The extent of the owner’s involvement is a critical indicator, but perhaps not for the reason you think. The more involved the owner is in day-to-day operations, the more central they are to the business, the less the business will be worth down the road. If the owner is the linchpin that holds everything together, what will happen to the company when they leave? Evaluating operations is more about the system and the structure of the team. Look at the organizational chart and who’s on it – are they good employees or bad employees? Examine the company’s processes and procedures and how new team members are trained and onboarded. The owner sets the vision, but it’s the team that increases company value by carrying out the vision.

3. Growth opportunities

Nobody wants to buy a business and keep it exactly as it is. They want to see potential for growth in the future, especially the potential for return on their investment as a buyer. Whether it’s a simple price increase or new locations, whoever buys the business is going to ask about growth opportunities. Indicators like product or service diversification in both the company and the industry it’s in give a good sense of whether the company is moving forward or standing still (and at risk of going backward). The more potential you can show, the more upside there will be for the next owner — adding up to greater value.

Cycle of success

When the qualitative side of the equation is working, it all ties together. The owner knows the goals, which are aligned with where the company is going, and is leading the organization but working themselves out of the day-to-day operations; the business grows and creates more growth opportunities for the next owner. Paired with profitable numbers, it’s a cycle that builds a high-quality business.

For the best owners, it takes a minimum of three to five years to get that cycle working for you and have reliable indicators of your value. Making it part of a 10-year strategy is even better.

At Exit Factor, we have 62 different qualitative indicators that we use for determining company worth. We don’t use them all, or even close to that, for every business; it’s usually a matter of tweaking three to five of the 62 indicators. Figure out which of those 62 are essential for your company, and you’ll have a truly forward-looking strategy for profitable growth.

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This 2TB Data Storage Offer Is a Can’t-Miss at $89.97

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11 hours ago

October 19, 2024

Entireweb News Bot

This 2TB Data Storage Offer Is a Can't-Miss at $89.97

Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

Data storage is more critical than ever for business leaders and entrepreneurs. With digital files growing exponentially, having secure, reliable, and easily accessible storage is essential for staying organized and efficient.

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Data management is no longer just about storing files—it’s about securely organizing, quickly accessing, and easily sharing them across platforms. Since many businesses rely heavily on digital content, from presentations and documents to high-definition videos and large datasets, having the right storage tools is a game-changer.

1TB FolderFort cloud storage

1TB of Cloud Storage gives you access to your files from anywhere, anytime. FolderFort is a user-friendly, secure cloud storage platform designed for professionals. It allows you to upload, manage, and share files easily with unlimited users, making it perfect for team collaborations. Need to share sensitive documents or large files with clients? You can create public or restricted-access links in seconds.

Unlimited Workspaces allow you to create specific environments for different projects or teams. Whether you’re a solo entrepreneur or managing multiple projects, FolderFort makes organizing easy. The cloud platform is also scalable, allowing you to upgrade if your storage needs grow—no downtime, no hassle.

Portable USB 3.0 1TB external hard drive

The 1TB external hard drive is perfect for offline access or physical backups. It’s ultra-slim, lightweight, and portable, so you can take it wherever your business takes you. Whether you’re backing up large media files or storing important documents, this hard drive delivers high-speed data transfers at up to 120Mbps read and 104Mbps write speeds.

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StackSocial prices subject to change.

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X Rival Bluesky Gains 1.2 Million New Users in 2 Days

Published

1 day ago

October 18, 2024

Entireweb News Bot

X Rival Bluesky Gains 1.2 Million New Users in 2 Days

X users may be migrating to bluer skies after a major change.

Bluesky is an open, ad-free social network that grew out of Twitter, now X, in 2019. The platform announced on Thursday that half a million new users signed up within a day of X announcing that it would be changing up its blocking feature “soon.” Blocked users on X will be able to see public posts but not like, reply or engage with them in any other way.

Although X said the change was to prevent people blocking others from sharing sensitive information about people they have blocked, X users stated that the move would support stalking, render the Block function useless and violate Google Play Store and Apple App Store requirements.

Bluesky stated on Friday that more than 1.2 million people have signed up to use the platform since Wednesday.

congratulations everyone, we have now passed 12 million people total on bluesky!!! ?

over 1.2M new people have joined bluesky in the last two days — welcome!! ???

[image or embed]

— Bluesky (@bsky.app) October 18, 2024 at 1:42 PM

Soon we’ll be launching a change to how the block function works.

If your posts are set to public, accounts you have blocked will be able to view them, but they will not be able to engage (like, reply, repost, etc.).

— Engineering (@XEng) October 16, 2024

Bluesky also experienced a surge in users last month after X shut down operations in Brazil on August 30. Within a week of the ban, Bluesky added 3 million new users, 85% of whom were from Brazil. X resumed operations on October 9, but not before Bluesky surged to 10 million users in September.

The platform now has 12 million users total, per a Friday announcement.

Meta’s Threads also appears to be experiencing a surge in users; it is currently first under the top free apps for iPhone list, with Bluesky coming in fifth. Threads surpassed 175 million users in July.

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Netflix Adds 5 Million Users, Analysts Predict Price Hike

Published

2 days ago

October 18, 2024

Entireweb News Bot

Netflix Adds 5 Million Users, Analysts Predict Price Hike

Netflix posted its third-quarter earnings on Thursday and beat Wall Street predictions for both subscribers added and overall revenue. Meanwhile, analysts forecast that the streaming giant will soon raise its prices.

Netflix’s revenue for the third quarter was $9.825 billion, slightly more than the $9.769 billion analysts had predicted. The company also added 5.1 million subscribers, well over the 4 million additional users investors expected.

“Engagement, our best proxy for member happiness, remains healthy,” the report noted. “Through the first three quarters of 2024, view hours per member amongst owner households (the clearest view of engagement trends post the introduction of paid sharing) increased year over year.”

Netflix currently has over 600 million users with each one spending about two hours per day on the platform, per the report.

Will Netflix Raise Prices in the U.S.?

Thursday’s earnings report may not mean subscribers will avoid a price hike. The streaming company is increasing prices in Spain and Italy on Friday, and analysts from investment firms including Oppenheimer & Co. stated before the earnings release that a price hike may be on the way for U.S. users, too.

Netflix currently costs $6.99 per month for a standard plan with ads, $15.49 per month for a standard plan with up to two devices watching at the same time, and $22.99 per month for a premium plan with up to four devices supported.

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