What to Expect in a Business Valuation Report
A business valuation report assesses the fitness of your business to sell through the values that attract future buyers. This can include financial performance metrics, leadership structure, cash flow health, and key differentiators of your business from its competitors. A trained business advisor can help to guide you through a business valuation report and interpret what its findings mean for the future of your business.
Understanding the Business Appraisal Process
Keeping a pulse on the value of your business is essential because it can change rapidly based on economic conditions and fluctuations happening in your industry. Assessing fair market value for your business is a bit like taking a blood pressure reading—it can spike or drop based upon current stressors happening in the body. However, the good news is, there are established metrics used by the industry as a way to measure and value your business’s worth.
Knowing your estimated future revenue and what factors are driving it is essential to determining the value of your business. Most business owners are stuck in the daily realities of running their companies. Staffing concerns, overhead costs, dealing with suppliers, and managing operations can occupy an overwhelming amount of time. It’s easy to see then how conversations around sustainable growth and selling the company can fall into the background.
As with most things, you can’t improve what you can’t see. So knowing the worth of what you’ve built is essential to retaining a high-value company, and selling if that is your goal.
What Does a Sample Business Valuation Report Cover?
A business valuation report is a financial reading on the state of your business in the market. It can cover any number of metrics that help measure the financial performance of your business. Elements of a sample business valuation report could analyze:
Your business’ EBITA multiple
Revenue history and profitability
Current market opportunities
Positioning against competitors
Readiness to sell
The best metrics to see in a business valuation report are measures that potential investors or acquirers would see as foundational to a business’s long-term success. These aspects of business success include financial performance, growth potential, business structure, market position, cash flow health, and recurring revenue.
A business valuation report should include industry-specific data to compare your company against others of similar size and product offering. Credible valuation reports use NAICS codes to determine valuation scores, which is the classification system used in North American countries to track statistical data by industry about business performance in the U.S. economy. This feature of comparability ensures your business value is being measured squarely using the best data available in the space.
What Does a Business Valuation Score Mean?
Many business valuation reports offer a scoring system for a business’s performance according to certain metrics. This is different in nature than an EBITA multiple. A high score ensures you are prepared for a well-ordered transition in the sale of your company. Your legal and financial paperwork is in order across locations, the market timing for the sale of your business is correct, your internal teams are prepared, and the business owner is empowered with an estimate of the business’s fair market price.
A low score on a business valuation isn’t bad. In fact, it’s usually the best place to start to get the maximum value from a business valuation report. It simply means that there are areas of attention that need improvement to boost the overall valuation of your business. In some cases, a low score on a business valuation report may indicate that the business is not sellable beyond its liquidation value. This process involves looking at the valuation report with an expert trained to guide a business owner through each finding and determine what next steps are required.
The process of valuation involves looking at financial reporting and revenue statements, but that’s not all. Looking at qualitative metrics like customer satisfaction, brand strength, anticipated changes in the market, economic factors, and global events all contribute to the current and projected value of your business.
Let Us Help You Grow Your Business Value!
Thankfully, some business valuations offer a customized plan of action based on your company’s revenue and other data, to deliver tailored insight to strengthen your business’s value. In an introductory call, an advisor can help you walk through the specifics of the business appraisal process and what information you need to start today. It is as simple as that! Set up a call with a business valuation expert today to know the fair market value of your business. Answer a questionnaire about your business and receive a custom valuation report detailing your business’s estimated current and future profit.
