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What Are the Different Factors That Affect a Business Valuation?

January 7, 2021

business valuation services
Most pharmacy and business owners never think about finding out their business's value until they actually want to sell the business. Unfortunately, that is often too late to increase their business value. Initially, pharmacy owners are hesitant to determine their business's worth because they feel they already know it. But after meeting with our trusted advisors at EVCOR, you will finally realize the importance of securing business valuation services from real experts. In conducting proper business evaluation services, EVCOR must conduct a thorough examination of the pharmacy’s balance sheet, its existing customer base, current, and future growth prospects, any intangible assets, and other factors to arrive at an approximate estimation of what you can expect to be fair market value.

Factors That Impact Company Valuation

The valuation of a pharmacy business will be determined by a combination of factors. Below are some of the factors to consider:

Industry and Investor Demand

Suppose the industry is classified as ‘hot’, for example – the pharmaceutical industry during the COVID-19 pandemic. In that case, there will be a higher likelihood of achieving a higher valuation than other companies that operate in a different industry but are at the same stage of development and current traction.

Market Size

The pharmacy industry is well-sized and therefore tends to command a potentially higher valuation. However, market size depends on locations. If your product lies in a high demand industry with low market supply within that location, investors will come knocking on your door. If you operate in an overly saturated market with numerous competitors in your city, your chances of attracting investors are on the lower side unless your business has a powerful competitive advantage.

Revenue Trends

If your pharmacy business has been consistently driving high revenue growth, then your business will command a premium to the prevailing average market EBITDA multiple. On the other hand, if you have a pharmacy business with substandard or decreasing revenues, it will garner a lower market multiple.

Customer Base Concentration

One of the main factors that impact your business valuation is your customer base. Do you have favourable relations with long-term customers? Or, do you have a diverse customer base with many customers? Companies with a significant customer base will have a higher market multiple. EVCOR offers expert business valuation in Toronto, Vancouver, Edmonton, and many other areas, including Calgary, Regina, Saskatoon, Winnipeg, and most other areas in Alberta, Saskatchewan, Manitoba, and Ontario. Our services include:
  • Business valuation services
  • Value preservation of your business
  • Value enhancement by identifying opportunities for improvement
  • Transaction advisory services
Contact us to learn more about our business evaluation services.
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