There are few things more American than the start-up company. Every month, about 543,000 new companies open their doors around the country. Staying in business is the hard part. Nearly 70% of new businesses with employees survive for two years. About 50% are around after five years. By the ten year mark, only a third are still operating and after 15 years, that number is down to 25%. If you are looking to get a business valuation report, there are steps you can take to get the best one for your company.
- Start with the basics. When you are looking to get an accurate business valuation report for your business, the first two things you need to do are compile all of the pertinent data and decide why you really need this to be done. As counterintuitive as this may sound, your business valuation analysis is not at all absolute. It is very much influenced by the reasons for needing the analysis.
- Find your EBITDA. Calculate your business’s earnings before interest taxes depreciation and amortization (EBITDA). Your EBITDA is a very important starting point when you are working on your business valuation report this number is also one of the most valuable and common metrics used for ascertaining your business appraisal valuation. Take your last three years and get the net income your company has made. Add interest gained, taxes paid, depreciation and amortization of the business and subtract that from the net income. Make any adjustments to this based on non-recurring expenses or money coming in. If you do not have three years of financials to draw from, use what you have.
- Calculate the intangibles with your company. Your company is worth more than the sum of its parts and the EBITDA. Some companies have transcended traditional business valuation tools. When people talk about the company, Google, it is not always just in reference to the business or its stock value. The word Google has become its own verb, i.e., “I did not know where to get that product so Googled it.” What kind of valuation can you put on this? When Prince changed his name to a symbol, it was over a fight with his record company, Warner Brothers. How much was this decision worth? The value of having your company be turned into a verb or the worth of a music catalogue that has not been done yet, regardless of the artist who wrote it can be worth millions of dollars or just a few pennies. No answer is more than an educated guess. These intangibles may be the most important part of selling your business plan to investors who want to see a lot of earning potential with what you are doing.
- Look at your market value. One way to do this is to look at your competitors or other businesses that do the same kind of work in your region with the same number of people. The best case scenario is for you to look at similar companies to yours that were recently put up for sale. The best way to use this business valuation method is when you are trying to sell your company. If you can find four or five examples of other similar companies that have recently been sold, you strengthen your reasoning.
- Leave your emotions at the door.andnbsp;Your business means a lot to you. You see its potential and want to see your dream succeed. That is normal. andnbsp;This is why many companies hire an outside business valuation firm to prepare their business valuation report. Business owners may not have the objectivity needed to get an accurate business valuation. It can often be very helpful to have someone come in from the outside to help you with this process.
It can be important to get the right business valuation report for your company’s specific needs and situation. There are many business valuation tools and software to help you but often the best thing you can do is look to an outside firm to conduct the analysis and write your report. This can also make your business valuation report more credible to potential buyers and investors.