If you want to determine the success of your business, you will have to value it. However, business valuation is a critical process. Most of you think that your business is on the right track as long as you are earning high revenues. Still, it takes into account various factors such as the sector you are in, the level of competition, the type of competition, and how you run your business.
Well, such factors require you to analyse more in-depth into the performance of your business, and it requires exceptional skills and patience. If you want to get a quick idea of the worth of your business, the turnover valuation will be the right way.
What is turnover? Can you address it as profits?
Before you value a business based on turnover, you should know what exactly it is. It refers to the total sales generated by your company. You can say it, in other words, gross revenues or gross profits.
Turnover is the total income of your business, known as net sales. However, profits are figures left after meeting all of your expenses. It is vital to know the level of turnover to find out whether you are attaining the level of the desired profits.
Although you leave no stone unturned to market your business, the sale is likely to the dropdown. Gross profits can be low compared to the annual turnover, and if so, you need to implement a strategy to cut back on the cost. If you keep the operation cost low, your profits will go up.
When Should You Estimate the Success of Turnover?
Though turnover is the critical factor in determining the success of a business, you need to find out the right time to do it. Even though sales rather talk about how efficient your operations are, it serves a reasonable basis for business valuation. If you have a start-up, you may not have a set of company accounts. In this situation, you may need to value your business as soon as possible.
Another scenario this valuation method works is when your business has a complicated setup. This method generally works for retail stores. As they have a record of sales made every day, they do not have any other way to do it.
How to Find the Value of a Business
Now you have got to know what is turnover in business and when you should value your business based on turnover. To start the valuation process, get the figures for weekly sales. Get your total turnover to date and add in the figure of previous financial years’ sales. Divide the sum by the number of weeks in that period.
Once you have estimated the average weekly turnover, you will have to decide how many weeks of that turnover equate to determine the value of your business.
If you have a grocery store, you should multiply the figure by 10 weeks, and if you have a salon, you should increase the sum by 15 weeks. If you have a café or a takeaway, you should multiply the amount by 20 weeks. If you have a restaurant, you should consider multiple the sum by 30 weeks.
What Can be the Average Small Business Turnover in the UK?
Getting into a profitable condition requires a lot of hard work. Many of you get disillusioned with the fact that you are making lower profits than you imagined at the time of taking it off the ground. Over 50% of businesses fail within the first five years to withstand the competition.
Of course, turnover varies from the size of the company. Big companies will have higher turnover than small companies, including start-ups, but the question is how much a small business makes turnover in a year.
According to a survey, the average small business turnover in the UK with no employee is £35,000. It increases as the number of employees increase. If it has 10 employees, the turnover will be around £700,000. If it has 20 employees, it will be around £1,400,000.
There is no denying that if you can have enough profits after meeting all your expenses, your business is growing. Small businesses, including sole proprietors, can find out the value of the company based on turnover. If the turnover is high, the cost will also be high. Never miss an opportunity to keep the ball rolling even if you lack funds because small business loans can help you.
There are various Private lenders in the UK who could offer you these loans despite bad credit rating.