Each report is tailored to your individual business and saves you the cost of dealing with business brokers or accountants to value your company prior to business sale.
We will provide you with information showing what increases and reduces your company valuation. We can offer strategies to improve overall profitability and valuation for business sale.
It's not just about your business, but also the market and the motivation of the buyer. We provide you with a sensible range of valuations dependent upon these variables. It's sensible to value your company well in advance of a business sale to allow you time to prepare for your exit.
Your business is more valuable if you can show a trend towards growth on all of the major financial measures. Turnover, gross profit, net margin and operating profits. A picture paints a thousand words if you want to get a complex message over in a simple way. Our standard valuation will give you a clear figure and outline of the major contributing factors, without any of the hype, as we are not business brokers receiving a percentage of your hard earned value at business sale.
Understanding what proportion of your business value is made up of stock, property or goodwill allows you to focus on these areas in preparation for business sale. Similarly loans and creditors having a detracting effect on the valuation.
Being able to quickly show a potential acquirer or investor that you are growing the underlying value of the business gives them confidence that this will continue after you're gone. The Fairmountain Valuation Report gives both the buyer and seller something tangible to work with, not just the financial statements or someone's opinion
We have a range of strategies to increase your sales, improve your margins and make a positive difference to your bottom line valuation. We can advise you on these areas, or take an equity stake in the business through investment and help you to create this increased value. Ultimately we are looking to help increase profits so that on exit the value of the company is worth 2-5 times its current valuation and we all share in the upside at business sale.
The Business of Business Valuation
The topic of business valuation is frequently discussed in corporate finance. Business valuation is typically conducted when a company is looking to sell all or a portion of its operations, or looking to merge with or acquire another company. The valuation of a business is the process of determining the current worth of a business, using objective measures, and evaluating all aspects of the business.
A business valuation might include an analysis of the company's management, its capital structure, its future earnings prospects or the market value of its assets. The tools used for valuation can vary among evaluators, businesses, and industries. Common approaches to value a company include a review of financial statements, discounting cash flow models and similar company comparisons.
Methods of Valuation
There are many ways a company can be valued these include:
1. Market Capitalisation
Is calculated by multiplying the company’s share price by its total number of shares outstanding.
2. Times Revenue Method
Revenue is measured over a period of time, a multiplier is applied which depends on the industry and economic environment.
3. Earnings Multiplier
The earnings multiplier adjusts future profits against cash flow that could be invested at the current interest rate over the same period of time. In other words, it adjusts the current PE ratio to account for current interest rates.
4. Multiple of EBITDA
A multiplier is applied to the earnings of a company before interest, taxation, depreciation and amortisation (EBITDA). This multiplier varies dependent upon market conditions, and the likelihood of EBITDA improving or remaining at the current levels.
5. Discounted Cash Flow (DCF) Method
This method of business valuation is similar to the earnings multiplier. This method is based on projections of future cash flows, which are adjusted to get the current market value of the company. The main difference between the discounted cash flow method and the profit multiplier method is that it takes inflation into consideration to calculate the present value.
6. Book Value
This is the value of shareholders’ equity of a business as shown on the balance sheet statement. The book value is derived by subtracting the total liabilities of a company from its total assets.
7. Liquidation Value
This is the net cash that a business will receive if its assets were liquidated and liabilities were paid off today.
This is not an exhaustive list of valuation methods. Fairmountain focusses on EBITDA as a guideline but may well use other aspects of forward cash-flowing dependent upon how the acquisition is to be structured. The use of the Fairmountain Valuation Tool TM simplifies these methodologies and translates them into easy to understand component parts to try to give a simplified but realistic current business sale value.