In its simplest form, a business valuation is the present value of a future income stream the business will generate. To come up with a viable ownership or sales valuation for any business, there are several other factors that must be considered.
To arrive at a value for your business that is defensible and would make sense to any prospective partner or acquiring party, I go well beyond the basic math and examine every aspect of your business along with industry and market trends. Some of the key components of the valuation work that I do:
- Market Condition analysis. Is your business in a hot, cold or "warm" market segment? How attractive is your business to the current universe of buyers, in your market?
- What is the growth rate of your business? What is the balance of the discount rate against the growth rate?
- How consistent and predictable is the growth (or contraction) curve, for your business?
- How diverse is the customer base? Do one or two large customers account for more than 10% of the yearly revenue for the business? Or, are the customers well distributed along the revenue curve?
- Is the business profitable? If not, is there a viable game plan to get it profitable?
- Is the company pre-revenue? If so, does it have a "killer" asset (e.g a Patent Portfolio) that will make it attractive to any potential purchaser?
- Which comparables make the most sense, for your company? What is the right multiple of earnings, to benchmark your business against?
- What are the Key Performance Indicators that we will use to measure your company, and to establish a defensible set of other measurements that will influence the overall valuation analysis? For example, is this an online company that needs to measure unique visitors per month? How about cost of acquiring new customers?
- Goodwill. How much of the business value is built into the brand itself? Is the current owner a significant part of the value of goodwill? What would a viable transition plan look like, with the goal of customer retention?
As you can see this is much more than simply filling out a spreadsheet and getting an answer. I have experience in this area and will work diligently with you to establish the overall game plan for business valuation, then execute on that plan.
Don't leave your business valuation to chance - if you wish to discuss your requirements, please contact me anytime.
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