Business Valuation Services

Business Valuation Services

BHVC develops comprehensive business valuations, performed for new and existing businesses for the purposes of selling the business or determining the value of equity participation. A number of widely accepted valuation methodologies are used, with a weighted-average valuation determining a final value.

This approach is similar to how an appraiser values a residential or commercial building. They take several approaches to value and then weight each method based on its applicability.

Here are some of the methods we use:

Discounted Cash Flow – This is the most common method of valuation and it takes the Free Cash Flow of the company over time, and discounts those cash flows back in time to arrive a a present value for that stream of future cash flows.

Industry Comparables – If you’re in an industry that has a significant number of sales transactions, it can be beneficial to compare those transactions to yours, much like an appraiser uses comparable sales on real estate to assist in arriving at a value for the subject property.

Revenue Multiples – Again, this tends to be industry specific, and depends on how much revenue the company brings in per year. You will over hear the expression “X time revenue” where X is a multiple such as 2 or 3. So a company with $2 million in revenues with a 2X multiple might be valued at $4 million.

Net Income Multiple – This is similar to the revenue multiple about, but uses the company’s profitability as a yardstick for value. This will often be expressed as “X times earnings” where X is a multiple such as 7 or 8. So a company with $400,000 in net profits might be valued at $3.2 million.

Customer Multiples – This type of valuation is often used when a company can clearly show its value based upon its list of customers. For instance if a company sells customers subscriptions to a website, and that company charges $10 per month and has 100,000 customers, then a valuation might be based specifically on the number of active customers at the time of closing.

These valuation methods will be combined and weighted to come up with a comprehensive valuation number that can be easily defended. Having such a report can clearly help you in negotiating with an investor or in discussions of selling your company.

 

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