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What Makes European Small Businesses Valuable

31 August 2017, 14:18 CET

Last year, the number of businesses in Europe that were cashing out reached unprecedented levels.

The total deals made for business exists amounted to over 400 billion Euros. Tech companies that mainly sold cloud based or software as a service (SaaS) products made the most lucrative deals. Producers of Internet of Things (IoT) and purveyors of AI also won out major. It seems that more European startups and businesses are willing to cash out.

It begs the question, what makes a company worthy? Why would an IoT company fetch more money in a deal that another, possibly one that makes hardware? Business buyers look for certain qualities when going on acquisition sprees. A new report titled the "Art of Exiteering" examined 20 European businesses that cashed out and found out that some qualities stood out the most. In case you are wondering about selling your company, here is a list of successful business traits to watch out for:

A Problem Solving Premise

Most consumers prefer businesses that solve a problem of any sort to make life easier. It could be the invention of a new app or a production of a new gadget. It could also be something like an advice column offering information hard to find elsewhere. Consumers and major buyers both prefer businesses that are built on the problem-solving model. If your startup is based on this, then you can value the business more lucrative than most. You can also demand more for an exit sale.

Customers in the US

EU acquisition experts increasingly prefer businesses with customers in the US. It's a major advantage of the business has already expanded across the pond. However, even European businesses with a small but regular number of customers are a lot more valuable than those without, explains John R. Burgess, a Chicago-based management consultant. The biggest consumer market is still on the other side of the Atlantic. Companies can reap enormous profits with US buyers on the customer list. In fact, if your business has expanded to the US, then you might not need to sell for profit reasons alone. You can make significant demands in return if your EU business has American customers.

Good Team of Managers

Business buyers are not purchasing a product or a brand alone. They are buying the whole package. This package includes the management team. Expect your business to be thoroughly evaluated for the effectiveness of the management team. Whoever is buying the company will have to rely on these managers to make the transition. So, if the management team is subpar, then the overall value will go down. Having star employees, like researchers or specialists in a field, will also make your business more valuable to buyers.

The value of your business would also depend on the motivations of the buyer. Understanding why a buyer wants your company will also assist you in making a pitch that's more likely to get accepted. In the meantime, make sure your business has the above qualities that make it truly valuable to a potential buyer.

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