The 4 Phases of My Personal Valuation Process

Frequently, when I am working with a new business owner, they will ask me to help them come up with a valuation for their company as a starting point for negotiations. 

This is a loaded question considering there are many ways to measure the worth of a company. That’s why I like to use multiple valuation methods in order to create a range of potential values. 

The models I choose are different depending on the size and nature of the business as well as the industry it’s in. 

But, no matter how much the final models may differ, my primary valuation process remains the same. Read on to gain insight on the methods I use to calculate a business’s true value.

Discovery and Research

During the discovery and research phase, I gather all of the financial information about the company as well as information about how it was founded and what its mission is. I also find out more about the industry and its trends. 

Next, I take into account the customers and the market makeup in the area the business is located. This allows me to have knowledge of the business’ potential for growth. 

I also perform an analysis of the competition in that area. It’s best to know what other businesses are out there offering services in that space. Though, no two companies are the same.

I also look into the competitive advantages the business has and take into account how that would affect its value. Some businesses lead with their real estate and other’s value lies in their branding and customer service. 

Finally, I look into their organizational structure and employee makeup so that I can analyze how well they will survive a transition in ownership.

Data Analysis

Compiling the data may be the more cumbersome part of the valuation process, but data analysis is certainly the most complex.

After many years as a business broker, I have a lot of insider knowledge that allows me to estimate how much a workforce or customer service policy might be worth to the right buyer. 

But, placing a value on these intangible assets can be difficult for those who are unfamiliar with what else is available on the market and what assets have the most value to potential buyers.

Report Preparation

Once I perform a valuation on a business, I have to interpret my own insights for the seller. The reports I compile don’t just list the numbers of what I think your business will be worth.

I explain what the factors are currently driving that industry and break down what the buyer would need to do to be competitive. I also document the structure of the company in easy to follow charts that allow buyers to easily see who the key players are at your business.

Explanation of Report

The reports I create on valuation aren’t just a starting point for owners to figure out the worth of their company. They also play a key role in the shaping of the offering memorandums I send to potential buyers. 

As an expert business broker, I know how to evaluate your company against others in the marketplace and present the information about your company in an easily digestible format to potential buyers. 

Contact me today to schedule an initial consultation to discuss the ways I can help you assess and communicate the value of your business to qualified buyers.

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