Valuing a business requires time, patience, knowledge and know-how since there is no one valuation formula that can provide you with the correct value of your company. The best valuations are not a single number, but rather a range of value that indicates the differences in value as perceived by different types of potential buyers. At ASG we take all the time needed to provide you with your business' valuation range and we do this at no charge to you!
 

The Steps of Valuing a Company's Worth

The first step in the valuation process is recasting the financial statements. For all of you non-accountants out there, recasting is done to find the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Basically, all of the amortization, income taxes, excess owner compensation, interest, owner's and discretionary expenses, and depreciation are added back into the reported earnings. Then, interest income and understated expenses are deducted from reported earnings. The resulting number is EBITDA, a common financial acronym used to describe profit before taxes.
 
The EBITDA (also known as stabilized earnings), as well as potential buyers’ desired Return on Investment (ROI), is used to develop a range of value for the company. Of course requirements for ROI vary significantly from buyer to buyer, as well as by industry and size of the company, which also affects the valuation.
 
After determining a company's EBITDA, the next step is determining the net assets. This is also important when valuing a business as the net assets a buyer will receive when purchasing the company (including any liabilities the buyer will assume) affect the value of the company and must be included in any valuation approach. Every business varies significantly in its net assets, with some having substantial assets and others having very few. As a result, ASG will determine what approach to use to value the business appropriately and effectively. The business valuation will also be affected by the fact that most of transactions are financed, and lenders have their own requirements for valuation. Acquisition Services Group works to ensure that your company's valuation will fit the lenders' formulas. This increases the probability that buyers will be approved for the necessary funding and successfully complete the sales transaction. This level of diligence strengthens a transaction's possibility of receiving financing.