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10 Steps to Improved Business Valuations

Remember that “market multiples” are only indicators of value that other businesses have sold for – they do not explain value.

  • Detailed information on small and mid-size transactions is scant in comparison to the number of transactions that occur each year
  • Market multiples typically represent what an average company might sell for
  • Start-up ventures are too early in their business life cycle to use comparative market multiples to estimate value

Use care when selecting guideline public companies or comparable market transactions from which to benchmark your company’s market value.


Instead, develop the “intrinsic value” or “going concern value” of your business or investment opportunity integrating your:

  • Strategic Plan or your Vision as the current or future owner
  • Company’s revenue structure and cost structure
  • Financial Projections that translate the business plan into economic terms


Your road map to developing an accurate value of your business is your business plan or strategic plan.

  • This plan is critical to communicating your vision to other people such as equity investors, banks or lenders, key employees
  • It provides the framework from which to assess your company or investment opportunity relative to alternative investments


Develop a realistic, not conservative, forecast – leave room for the skeptics.
  • Lenders and prospective buyers will layer in plenty of conservatism
  • The most common mistakes are to overestimate revenues, underestimate expenses, and to underestimate how long it takes to hit your revenue projections
  • Ideally, a Base, Low, and High forecast help to frame the prospective range of business value


Your forecast should cover the years necessary to reach a reasonably steady state of operations. Doing so:

  • Allows for the recognition of your investment and start-up efforts, if applicable
  • Demonstrates the financial rewards for successfully running your business


What will it take for your business to stay competitive?

  • Financial projections must anticipate the investment required and illustrate the benefit earned to stay competitive.
  • What will change for you – competition, technology, regulations, consumer tastes?
  • What competitive strengths can be more fully developed?
  • What weaknesses, if not corrected, may cause your company’s downfall?


The present value of the company’s cash flows that occur beyond the last year of a forecast, known as the Terminal Value, is critical to estimating the full value of your business.

  • What are your expectations over the long run – continued revenue growth, increased competition, early exit via IPO or sale to a strategic investor?
  • These assumptions and others are critical in profiling the business value of your company.
  • The term residual value can be used interchangeably with terminal value.


Represents the blended required rate of return desired by equity investors and debt investors to fund your business.
  • Use a realistic cost of capital that represents your opportunity cost for a comparable investment elsewhere
  • If debt is borrowed does it require a personal guarantee by you or the shareholders?
  • Often referred to as Discount Rate


It’s a lot to take in. Use an expert in finance and valuation to estimate the value of your business.

  • Over or underestimating the value of your investment opportunity can be very expensive
  • A valuation professional can give you an impartial view of your company’s value
  • And a well prepared valuation report can facilitate a successful negotiation between opposing parties


You will be able to:

  • Enjoy peace of mind and improved business planning
  • Share your vision with prospective equity partners
  • Buy or sell your business from a position of knowledge and strength
  • Facilitate project financing negotiations
  • Satisfactorily comply with tax or legal requirements


Contact us today to discuss how SVA's business advisory services can help you meet your business objectives.


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National Association of Certified Valuators and Analysts (NACVA)