Distinctive businesses with particular products or services, geographically dispersed clients, and rapid growth require exact valuations. Most banks and advisors do not have a true understanding of what impacts business valuations in the real world.
Did we mention getting a formal valuation the “old school” way can take months and costs a fortune? We know that this is not working in today's world, so we have decided to do something about it.
We have established a proprietary algorithm that accurately measures the financial and non-financial factors that impact a company’s value. With unparalleled industry expertise and peerless access to live market comparables, we are able to provide the most accurate business valuations to companies of all shapes and sizes.
The way your business makes money and the structure of those contracts is an important piece of the valuation puzzle. Generally, recurring revenue-based companies sell on the higher end of the valuation range, whereas one-time project-based companies sell on the lower end.
If your business has a specialization in a certain industry, or if the services you provide are hyper-specific, you will be more sought after by buyers – which puts you on the higher end of the valuation spectrum.
The type of business has a big impact on where you fall within the valuation range. Those industries which are reviewed as recession proof and have consistently performed during historical economic downturns are more valuable to buyers than up-and-coming industries or those significantly impacted if the market takes a hit.
For businesses of any size, the structure of the management and leadership team is a crucial valuation factor. A robust and experienced management team (assuming they will stay on board post-transaction) will be considered valuable to a buyer.
Setting up your business to be able to strategically scale its revenue or EBITDA is a crucial factor for determining its valuation. Showing that your business historically has, and can continue to, keep up with market demands, improve efficiency, and increase profit margins is an important piece of the valuation pie.
The more well-defined the business development process within your business, the higher your valuation. Ideally, your company has a solid strategy behind both inbound and outbound sales.
If you have a client that makes up more than 35 % of your total revenue, this will have a negative impact on your valuation and you will find yourself on the lower end of the valuation spectrum.
If you have clients that have been with your business for quite some time, and you can clearly identify your churn rate, awesome! This has a positive impact on your valuation. If you are constantly churning and burning through clients, more focused on getting the next client than keeping your current clients happy, this will have a negative impact on your valuation.
What does someone see when they Google you or your company? What do your clients and employees think of your business? Having a stellar reputation in your desired market has a positive impact on your business valuation.
Buyers want to purchase businesses from sellers who believe in the long-term viability of the company. If you are a seller who wants to be completely out of the companies in 90 days, this can have a negative impact on your valuation. If you are open to a longer transition plan, this will have a positive impact on your valuation. That is why your individual succession planing cannot be done soon enough!
Understanding your company’s valuation is the core of an acquisition strategy. It allows entrepreneurs to identify the most strategic time to sell and offers a benchmark for understanding the financial return on your countless hours of hard work and taking multiple risks.
We want to understand the full picture – what makes your business so successful? Meet with our team to share the story of your business and help us craft the narrative around your value proposition for potential buyers. We will review how businesses are valued to ensure you are armed with all the information you need to understand your value in the market and how to talk with potential buyers.
Our team will analyze your financial data to develop an adjusted EBITDA considering any add-backs, one-time costs, owner’s expenses running through the business, and any other outstanding factors to ensure you are getting the highest return for your hard work.
We assess your company’s qualitative factors from our kick off conversation to determine where you fall in the multiple range. Attributes considered include:
We put our findings into a detailed visual pitch deck to showcase your company’s value and arm you with the knowledge you need to make strategic decisions. Presentation documents include: Financial Summary & Valuation – We take a deep dive of the quantitative factors that impact your valuation and determine the best-fit multiple for your go-to-market strategy.
Business Scorecard – We discuss the specific qualitative factors that make up your business and contribute to the valuation multiple.
At P4i, honest and loyal relationships are our most precious resource. We support entrepreneurs throughout the entirety of their career – from foundation or purchase through a sale or strategic exit. We are more than just M&A advisors, we are strategic M&A entrepreneurs that believe in being boldly different.