It’s tempting to think of valuation as an end point. Or as the final number, or even as the sum of your life’s work. But it isn’t.
A valuation is only a reflection of your business’ value at the moment it is made. When you work with Seaview, we help you understand that value so you can drive it higher.
So, how do we assess value? And how does that help you?
Business valuation is a mixture of art and science. You can’t just throw some numbers in a calculator and get an accurate figure. But there are some rules of thumb, and they are helpful in understanding your business’ value.
One rule of thumb is the below:
Value = (Revenue – Expenses) x (Growth – Risk)
We use historical data to predict revenue and expenses. But really, what we are doing is projecting for the future: this is to provide an indication of what returns a purchaser might receive in the future. It is important to note that there are ways to improve this return, and in turn make your business more appealing to buyers. Our thorough analysis lets you know the changes you can make, firstly in regards to revenue and expenses. We help you identify and action these necessary changes. In the same way, we help find new efficiencies to drive your revenue.
Moving to the other side of the equation, we consider the past, future, and present all at once. When we look at growth, we look at factors both internal and external to your business for a complete vision. We ask: What environment is the business operating in? Is it an industry of boom? Or bust? Does this business have a pricing and service model appropriate their market? Or are they out-of-step with their competitors?
Internally, does this business have in place solid processes and goals for the future?
If you’re missing these, our valuation process can help you put these in place.
Looking internally will also help you find risk factors in your organisation. Does much of the value of your company rest on the shoulders of one or two key employees? Would the business crumble on their sudden exit? Does your business have unresolved legal or compliance issues? There are a whole variety of factors that make up this risk element: we help you understand and minimise them.
Valuing a business, even if it is expressly for the purpose of sale, is a gateway to better value. When done right, you receive a clear, transparent understanding of how to go forward. As we said, valuation is not an end point: it’s the beginning of an understanding.
For those who’ve taken the time to nurture their business, the end point should be a reward, not a disappointment.