Business Valuations FAQs
Business Valuations FAQs
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Why do I need a business valuation?
When entering a company sale process, it is strongly recommended to be clear about your goals, from the perspectives of what you want to achieve for the business, for your own future plans and also financially. Setting the right valuation at the outset will enable us to identify and nurture the most suitable buyers to generate a competitive bidding environment. We pride ourselves on going beyond historic valuations to exceed our clients’ expectations.
How do you determine the value of a business?
There are various ways to value a company. It could be based upon multiples of profit, turnover or comparisons to previous acquisitions in similar sectors. But ultimately, it should always be borne in mind that the value is only determined by how much a buyer is prepared to pay. You should not undervalue your company, but nor should you price yourself out of the market.
What is a valuation approach?
There are several approaches that can be applied to valuing a company. These include an asset-based approach, valuing a business on the strength of its assets and liabilities; an income approach, based on expected future cashflows; a market approach, based on the prices of comparable businesses or transactions; and a brand valuation approach, based on the company’s brand equity and reputation.
What information will I need at the valuation meeting?
We will begin to identify ‘value drivers’ that will catch the eye of potential acquirers and spark an appetite within them to buy your business. Useful information to prepare includes current and projected future financial performance; contractual and guaranteed future income; skills and experience of management and staff; ease of integration and synergies with potential acquirers; the market position and sector in which the business operates; and intellectual property, patents and trademarks.
Which assets are included in the valuation?
The overall valuation will cover all aspects of the company, e.g. physical assets, projected profits, your brand’s reputation and the prevailing strength of the industry. Asset valuation is the process of determining the value of a specific property, including stocks, options, bonds, buildings, machinery and land. The fair market value of the company’s total assets is calculated by evaluating the assets and deducting liabilities.
What are intangible assets, and can you value those assets?
An intangible asset is a resource with long-term financial value to a business but is not a material object. For example, licenses, copyrights, a brand name and computer software. It can also encompass your company’s reputation, skills and knowledge, research findings and goodwill. Such assets can be incorporated within a valuation if they have been acquired for a cost and/or have an identifiable value.