CRITERIA THAT INFLUENCE GOODWILL AND PRICE
GMO believes it is important for you to ensure the business of interest matches your lifestyle criteria as well as “measuring up” in respect to the ‘business performance’ you require.
Please consider some following points of measurement:
- Length and history of business
- Net profit stability and gross profit trend-lines
- Reasons for variations in sale levels
- Stability and quality of staff
- Performance of business compared to peer group
- Diversity of customer base
- Diversity of products and services
- Data base size and quality
- Systems and manuals of the business
- Strategic location of the business
- Licences or franchises held by the business
- Quality and efficiency of “Stock Turn” patterns
- Cash flow requirements
- Premises Lease rent, length and conditions
- Barriers to entry
- Strength of exclusivity (unique buying proposition)
- Technology opportunities for the business
- Supplier diversity
- Preferred supplier status
- Supplier contacts held
- Government panels and tender qualifications held
- Government approved licenses held
- Brand equity
- Social media exposure and rankings
- Foreign exchange risk
- Intellectual property
An intelligent Buyer will consider all these points and more. They can then compare more than one business and find the “ONE” which not only suits their lifestyle criteria, but also passes this point test with flying colours!
Your GMO Broker can provide you with an assessment matrix to complete on all the business you consider- so remember, you can profit from our experience!
One feature of our scoring matrix is that it focuses your mind as a prospective buyer on the strengths, weaknesses, threats and opportunities surrounding the business you are considering and also the industry it operates in and the regulatory environment surrounding its operations.
This is not dissimilar to completing a jigsaw puzzle where every piece is important, but also each piece of information contributes to the ‘Big Picture” or a helicopter view of the business. The matrix will also identify in your own mind where you can make improvements and how you can put together an effective business plan.
Remember “the future belongs to those who plan for it”