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Business Valuation Process

Our Process for Valuing a Business

Valuing a company is a dynamic process that hinges on a fusion of qualitative and quantitative elements. An exhaustive evaluation of these factors is imperative in order to pinpoint the precise estimated value of your enterprise.

Accurately ascertaining the value or potential value range for a company is a meticulous endeavor, owing to the myriad qualitative and quantitative facets that necessitate careful consideration.

Gaining a profound comprehension of your company’s value necessitates a comprehensive analysis of its standing within the industry landscape. This entails a scrutiny of growth prospects, risk variables, and comparative assessments against industry peers. It’s worth noting that even seemingly inconspicuous factors wield the power to sway a company’s value by a significant margin – sometimes more than 50%. Hence, a methodical exploration is of utmost importance.

Our approach is anchored in a well-defined structure that draws insights from an extensive array of transactions. This enables us to rapidly pinpoint the pivotal factors exerting the most substantial influence on a company’s value with confidence and accuracy.

Presented below is our meticulous procedure for valuing small to mid-sized companies:

  1. Our initial step involves requesting your financial statements. Specifically, we require three years’ worth of Profit & Loss (P&L) statements, three years of balance sheets, and the monthly revenue data spanning the last three years.
  2. It’s worth noting that tax returns come into play at a later juncture. These documents serve the purpose of corroborating, to a certain extent, the accuracy of the financial statements.
  3. To comprehensively grasp the dynamics of your business and identify variables impacting its value, we furnish you with a comprehensive questionnaire. This tool, carefully crafted, delves into factors that can exert positive or negative influences on your company’s worth.
  4. Upon receipt of your financial statements, we meticulously “spread” the numbers by inputting them into our proprietary spreadsheet for in-depth analysis. This aids us in recognizing patterns that could either bolster or undermine your company’s valuation. We also prepare a comparative P&L, facilitating a thorough examination of normalized year-to-year P&Ls to detect consistent trends. Subsequently, an in-depth discussion ensues, encompassing numerous inquiries regarding the financial statements. This stage is pivotal in enhancing our understanding of your company, its operational landscape, and its distinctive competitive edge.
  5. The process advances as we normalize or adjust your financial statements based on the adjustments you’ve provided. Following your submission of adjustments, we meticulously review and validate each one for precision. Collaboratively, we identify allowable adjustments and those that warrant further consideration.
  6. With our financial model meticulously refined, we extend it for your review and feedback. Culminating in a comprehensive one to two-hour discussion, we delve into the spreadsheet, multiples, and factors wielding influence over your company’s value. This conversation serves dual purposes: to seek clarifications through targeted follow-up inquiries, thus finalizing your valuation, and to guide you through the potential spectrum of values applicable to your enterprise. Our intention extends beyond numerical presentation; we aim to arm you with a holistic understanding of your valuation’s underpinnings. This equips you to comprehend the rationale behind your company’s value proposition and empowers you with actionable insights to enhance its worth.

Witness the myriad advantages inherent in adopting this approach:

  • Attain a resolute comprehension of the spectrum of variables capable of influencing your company’s potential value.
  • Fathom the gamut of conceivable values for your enterprise, spanning from conservative estimates to lofty potentials.
  • Our strategy boasts simplicity and clarity, rendering it effortlessly comprehensible. It mirrors the real-world assessment methodologies employed by business acquirers.
  • Experience the transformative ability to observe real-time adjustments to your valuation model. This feature empowers you to gauge the potential repercussions of alterations on your valuation dynamically.
  • Delve into the intricacies that impact your business’s valuation, gaining comprehensive insights into its valuation dynamics.
  • Reap the benefits of a curated list of recommendations aimed at elevating your business’s value.
  • Attain profound insights into aspects that prospective buyers might perceive as stumbling blocks, enabling you to strategize effectively.
  • Unearth areas within your business warranting fortification, complete with a catalog of actionable measures to optimize your selling price.
  • Acquire crystal-clear clarity regarding any chasm between your current and potential business worth.
  • This meticulous process is a compass guiding you to a deeper comprehension of your business’s value. Such profound insights can galvanize your decision-making process, propelling you to either proceed with a sale or postpone it, with the intent of enhancing your company’s value for a future sale.
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