As a business owner, understanding value is very important. Businesses are unique and each present their own intricacies and challenges, so valuations can differ based on complexity and depth.
In this piece, we delve deeper into the different factors that can affect cost, key questions you should prepare for when considering a valuation and the types of valuations available. If you'd like more information, or a business valuation of your own, contact Nash Advisory today.
For a successful and accurate business valuation, your financial advisory firm will generally ask for:
With that information, the firm you engage should be able to form a preliminary view on value. This will also provide an indication on factors that will increase or decrease value, such as:
Business valuations can range from preliminary guidance, all the way through to a well executed and researched valuation report.
Preliminary valuation is based on turnover or profit. Any advisor, accountant or broker can give an indication on value based on these factors. This approach, while useful as a guideline, can misrepresent the value of your business. Simple valuations do not consider all factors that are important.
This type of report is generally provided by Corporate Advisors or Mergers and Acquisitions Advisors. Comprehensive valuations provide a thorough understanding of the fundamentals that affect value. Firms performing comprehensive valuations generally have access to large databases for market information on pricing and recent transactions.
Detailed research reports are typically generated by well resourced research firms who focus on a specific sector or company. The analysis undertaken is extremely detailed and primarily focused on identifying mispricing in markets for large investors such as trade companies or private equity firms.
A valuation can be a stressful and time-consuming process for a business owner, so it is important to understand what your objectives are. Different objectives seek different outcomes, and therefore require different levels of analysis.
To get a ballpark estimate for your business worth, a preliminary valuation may be able to assist you. As noted above, the estimates can vary substantially from the actual value.
A comprehensive valuation report should be able to guide this decision making process, as well as assist in identifying areas for improvement ahead of a sale.
While the most detailed option may be a detailed research report, many business may struggle to find value in a report of this nature.
As experienced Corporate Advisors, the team at Nash Advisory understand the factors that need to be taken into consideration when determining value.
As we advise on around 10-15 business sales a year, and numerous other valuations and corporate advisory roles, we are intimately familiar with how businesses can increase value ahead of a potential sale.
We offer a complimentary comprehensive valuation report valued at $5,000 to businesses with over $1 million in profit per year.
If you are considering a valuation, or for further information about our valuation process, reach out to our team for a confidential discussion.