Valuation—What’s My Company Worth?
The first step in selling a business is determining an offer price based on a financial analysis of the company (balance sheet, profit & loss, and cash flow), a review of the tangible assets (furniture, fixture, equipment, and inventory), and an evaluation of the intangible assets (trade names, brand names, other intellectual property, and goodwill)..
Navocate's Proprietary Valuation Model
To help determine a company's valuation, Navocate actually conducts its
own financial analysis. In fact, we have developed our own proprietary
valuation model that ...
- Delivers Financial Transparency
In our model all of the financial data is transparent—instead of being
hidden behind the curtain. Because all of the numbers are visible, we
can more easily see all of the trends: annual trends, category trends,
and line-item trends. Consequently, the model allows us to identify
problems as well as opportunities. Financial Transparency represents an
important starting point. But that's just the beginning.
- Analyzes Industry Comps
Of course, all business brokers and intermediaries review
comparable industry sales. (Don't they?) However, in
addition to accessing the standard databases of business comps, Navocate
subscribes to business sector analysis that gives us insight in about
650 different business categories. So in addition to reviewing the raw
numbers, we have access to industry experts who analyze trends and
provide succinct guidelines and insights at a summary level.
- Uses Multiple Valuation Methods
A business's value is based on revenue, cash flow, and profitability.
Navocate's valuation model analyzes value in several ways. It
applies multiples of gross revenue, seller discretionary earnings, EBIT,
or EBITDA—depending on the sector and size of the business. With
Navocate's valuations, one approach does not fit all businesses.
- Provides a Range of Value
Most professional valuations give business owners a single number: Your
business is worth $1,749,862.12. (The 12 cents is important.)
Is a single valuation number realistic in a dynamic marketplace? We
don't think so. That's why the Navocate valuation model applies
statistical analysis to give you a range of value based on the current
market—because only the market will dictate the final sales price.
And often that price can vary depending on the strength of the buyer,
market dynamics, and changing financing. That's why Navocate gives
owners a range of value, because we think that's more realistic.
- Buy Side Test
We're saving the best for last. While most brokers and intermediaries
stop with the sell side valuation, we go a step further. Navocate
analyzes whether or not the business will be profitable for a new buyer.
While the current owner may have a profitable business, s/he doesn't
have your debt structure. Our Buy Side test allows us to make
assumptions based on a typical buyer--such as cash injection and
financing. How will this deal be
financed? Will it qualify for a conventional bank loan? An
SBA loan? Will the seller take a note? Will there be a
bridge loan or mezzanine financing? What will the terms of those
debt instruments look like? All those factors will impact
profitability. Navocate's Buy Side Test looks at these variables
in advance.
- Balancing Deal Structure
In summary, Navocate's valuation model enables us to analyze the
entire transaction, and balance three critical elements to help us
structure the deal:
- Seller's requirement for maximum sale price.
- Buyer's requirement for optimal return.
- Debt service required to finance.
Navocate's proprietary valuation model works particularly well for our
market focus on Emerging Companies up to $25M.
What's your company worth?
Fees for our valuation services generally range from $2,500 – $5,000. However, we will waive the fee should you decide to have Navocate represent you in the sale of your business.
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