Business Valuation Service
Welcome to ExitAdviser's Custom Business Valuation Service aimed at private-owned small and medium sized businesses. Whatever your reason for seeking a professional business valuation, we're here to help. Typical business valuation cases:
- selling the business, or buying another;
- divorce proceedings;
- share buy-back;
- partner or shareholder dispute;
- exit planning.
For a competitive price, our experienced, MBA-qualified valuation team will first analyze, then value your business.
"Thank you very much for the very professional valuation. It lets us feel very comfortable with the asking price we are thinking about" - Dave O'Neil, General Manager of Green Genes
What we deliver
- Complete Valuation Report (PDF)
- Custom Business Valuation Tool (a open source MS Excel workbook to play through what-if scenarios)
- A summary presentation in PowerPoint and PDF formats (see an example)
Where feasible, the resulting files will be wrapped into digitally signed package in BDOC-format. Otherwise, the Valuation Report will be signed manually.
This confidential service to establish business worth typically takes 5 to 7 working days to complete assuming timely provision of financial and other pertinent information. Our aim is to keep your time commitment to a minimum. Should you need the results more quickly, just ask, and we will do our best to deliver at no extra charge.
The valuation process's work flow is well-structured and straightforward, undertaken primarily through email exchange.
How the appraisal works
It's simple, robust 5-step process:
- You submit a request to indicate your interest (click the "Contact us" button below, or "Sign-up now" to get a discounted price offer for Members of ExitAdviser's application).
- We will send you a price quote along with terms and conditions to accept.
- Once you've accepted the offer, we will send you a quetionnaire about your company's past, present and future aspects.
- We process the information and send you a draft Excel-based valuation model stating the assumptions made to estimate business worth.
- On receiving your confirmation to the assumptions and forecast made, we send the final Valuation Model along with Valuation Report and a PowerPoint summary slides.
The widely respected Discounted Cash Flow (DCF) method is used. DCF values the business entity as an asset, computing its present value from expected future cash flows. These cash flows are discounted back to today’s value using the Cost of Equity. This approach has the advantage of allowing the business value to be assessed directly, and under a range of risk assumptions, through varying the Cost of Equity (see the chart below).
Despite the business math applied, our valuations are designed to be easily understood. No CPA or financial expert is needed to "translate" the valuation report. We use common business terms, step-by-step analysis and explanation of each stage in the process. The end result is a logical and understandable report along with the open-source valuation model.
Cost of Equity: shall be understood as an opportunity cost, the rate of return that the business owner can expect to make on other undertakings of equivalent risk. The logic is: if you are considering investing in a business, then you have to earn more than you could make by investing the money elsewhere. It is the choices that you have today that should determine this opportunity cost, not choices that you might have had in the past. In addition, it has to be on equity investments of equivalent risk. Thus, the Cost of Equity should be higher for riskier businesses than safe, established ones with a solid track record.
Discounting: this is the discourse of determining the present value of future cash flows. By the concept of time value of money, a dollar is worth more today than it would be worth tomorrow given its capacity to earn interest (return on investment). Discounting is the method used to figure out how much future cash flows are worth today.
Present Value is the current worth of a future stream of cash flows given a specified rate of return. Future cash flows are devalued at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they are earnings or expenses. In the discourse of calculating the present value of Free Cash Flow to Equity (FCFE), the discount rate equals the Cost of Equity.
Here are a few alternative approaches that we do not utilize:
- The "book value" assessment. This method draws information from the balance sheet, so it's static and factual. However, in the case of an ongoing business, assets in the balance sheet can be expected to generate profits into the foreseeable future and beyond. This method, therefore, ignores future cash flows. The book value method is often associated with a business that has failed; that is, a "fire sale" break-up valuation.
- Market price. This method is appropriate if the business is listed in a competitive, openly-traded stock market, where the share price reflects demand and supply at a moment in time. Thus, for privately owned businesses this method cannot be considered.
- Multiples. There are a number of subjective "rules of thumb” based on multiples of, for example, profit, earnings before interest and tax (EBIT), earnings before interest, tax, depreciation and amortization (EBITDA), SDE (Seller’s Discretionary Earnings), and even sales revenue. However, these can be seen as wild guesses, which make them difficult to defend objectively in front of a potential buyer.