One of our Snowball services is producing formal business valuations, and we have carried out valuations that have been used for the sale of businesses, acquisitions, equity investment, for management buy outs, for strategy to assess different options, and in some cases purely for the general purpose of understanding where the valuation currently sits and ways it can be improved.
Having an accurate valuation of a business and understanding how it has been arrived at can become an extremely useful tool.
Our valuation service provides a comprehensive, independent, bespoke valuation that is specific to a business and circumstances.
In order to establish a true valuation of your business, at Snowball we work through our proven 15 stage analysis with the business, which starts with a face-to-face meeting at the company premises to ‘see’ the business. This will include discussion on financial performance, the market, the products and services and customers, and will also focus on understanding exceptional items, any potential add-backs and the direction of the business.
There are many firms out there that will offer you a valuation of your business ‘in just 15 or 30 minutes’, but in reality, this valuation will be worthless, as it will not take into account what actually occurs in your business and is purely a basic numerical exercise.
Once we have agreed the adjusted and true numbers for valuation purposes, we then use market leading data and benchmarking to establish the correct range of multiples to use. This will then enable us to provide the valuation figures. It is important to note that this data will be based on the specific and wider sector that your business fits into, and it is based on actual deals completed, not based on ‘for sale’ prices.
For businesses across most sectors and for established businesses, the multiple is usually applied to an adjusted profit number.
However, the recent big changes to employer national insurance contributions will in most cases now have a negative impact on that profit figure, where the additional costs cannot be fully offset by either an increase in revenue or a reduction in other costs. Many businesses we are seeing are not able to fully offset these costs and it is having an impact on their profits, their valuation and in some cases their banking covenants.
This could have quite an effect on a company valuation and impact any of the reasons why the valuation was being completed in the first place.
It also means that there will likely be more due diligence being undertaken by buyers and investors because there could be concern about the knock on impact of higher costs and slower sales growth.
All the more reason why valuations need to be calculated and considered carefully to ensure the parties and stakeholders involved on either side in any planned deal are on the same page and they are not miles apart or working on the basis of an outdated methodology.
Snowball offer a comprehensive valuation service through our Snowball Corporate Finance arm and therefore if you would like to know more about it, please do get in contact.