Starting a business involves taking risks and responsibility to produce good economic rewards in the form of cash flow profits and capital profits by growing the value of your company shares. In service businesses, the valuation is mostly tied to goodwill as there are no hard assets like equipment or machinery.
A real estate office has a similar notion since all they are selling is the reputation they have established for themselves. Unfortunately, the industry has been lacking when it comes to generating capital value and goodwill from real estate activities. Many owners barely have any appreciation when it comes to the value created by their business systems, processes, and activities.
The capital value that goes with a successful cash flow positive can lead to capital growth, which can bring a real estate business into the domain of enterprises that create significant value.
There are a few key considerations in determining the value of your real estate business, which Bentleys discussed in this infographic.