Business Valuation
How much is my company worth?
As a business owner, you may find yourself asking this question.
Receiving an accurate company valuation is imperative should you choose to put your exit strategy into action in today’s buoyant market. When valuing a business, there are a number of things that we should take into consideration.
Once you’ve got an idea of how much you can expect from an eventual sale, our team of experts will be able to discuss the nuances of any potential transaction, covering the following:
- Strength of brand;
- Future financial performance;
- Customer base;
- Experience and skills of management team;
- Supply chain strengths;
- Synergies with the buyer.
The Valuation Process
Let’s start with the numbers. The first part of a business valuation is the objective analysis, dealing with quantifiable data drivers. These pieces are easily measurable and provable, such as profits, or the standard accounting term called Earnings Before Interest Depreciation Taxes Amortization (EBIDTA), and other quantifiable items such as the market value of physical assets. From a simplistic approach, business valuation service experts can take EBIDTA, apply the market-driven capitalization rate, and arrive with a relatively good ballpark business valuation. In this case, the conclusion is simple: the valuation expert can easily correlate the fact that the higher the EBIDTA, the higher the valuation of the business and vice versa.
The second part of the business valuation is the subjective analysis, dealing with the market-driven factors. These are much more difficult to measure and quantify. Some examples of these valuation drivers might be the fact that a business has 75% of its revenue from one customer; or that it is dependent on only one, two or three products (services). A business where the owner is the business or the business is family operated, are all examples of subjective risks that must be taken into account in a business valuation. These factors and their effects on investment risks are more difficult to predict and must take market forces into account. In some cases, they can even result in lowering the business valuation. But how can a business owner know what a negative value driver really is? The ones listed here are only a few examples.
An expert business valuation services specialist will be able to help. It is crucial to a strong, defensible valuation, to find a business valuation services specialist who is knowledgeable about market forces. Someone with in-depth knowledge of today’s market can help you evaluate the soft, subjective valuation drivers. An expert business valuation specialist will work together with you, identifying the objective, data-driven strengths of your business and educating you on the subjective drivers that could be pulling your business valuation down. That way, your business valuation services specialist can analyze and apply the right amount of subjective forces in terms of discounts against the objective valuation drivers to arrive with an accurate and defensible business valuation.
Dazz Management offers business valuation services using an in-depth understanding of accepted valuation methodologies to produce a defensible report for appraisals and fairness opinions.
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