Listen To Our Most Recent Podcast Episodes As Soon As They're Live: Here!

Understanding the Value of Business Turnover Numbers

Posted by Tom Howard in Resources

Are you thinking about selling your company in the near future and are concerned about some of the metrics you need to have your eye on in order to set yourself up for a successful sale? You’re not alone. There are plenty of different things to think about in the process of preparing your business for a healthy and effective sale. It is important to take a look at business turnover because this is a useful measure of the overall health of a company, but it is often misconstrued with profit.

If you are thinking of buying a business, you will also need to take a look into the business turnover details associated with the company in question. Turnover refers to the total volume of sales made by a business in a certain period, which is also referenced as income or gross revenue.

Of course this is distinct from your profit. Business turnover is a good measure of a business’ performance because it is useful to look at for the entire duration of the business and especially important if you are in the process of valuing your company to sell it.

Making A Distinction Between Profit and Turnover

When you position your company as available for sale, you’ll need to do everything possible to present the strongest financial picture to an intended buyer. Turnover, of course, is distinct from profit. The turnover is the total business volume and income during a specific period of time, or the net sales figure.

Of course, profit refers to the earnings that are left over after any expenses have been deducted. It is likely that a buyer of your business will be interested in both of these numbers. Recognize that there are two different ways that profit can be measured within your business. Gross profit refers to sales, which is the total sales minus the cost of services or goods you sell.

Net profit, however, is what is leftover during a specific period of time after all expenses, such as taxes and administration have been deducted. It’s helpful to know your own turnover rate so that it can be included in the financial picture of your company when you prepare it for sale. In many cases when intended sellers reach out to us for the purposes of getting help from a business broker, they already have a strong financial picture and many of the details gathered. Deciding whether now is the right time to sell your company and the appropriate method of business valuation could lead you back to the drawing board to look for some ways that you can tweak the overall success of the business so that it is in the best possible position to be sold at a future date.

Our business brokers are thoroughly experienced in helping many different business owners move through this process and get the support that they need. Contact our knowledgeable business brokers to discover more about whether now the right time is to sell and the steps that you can take to prepare yourself.