How much is your business worth?

2 December 2015

As a corporate finance manager, part of my role consists of valuing businesses for a number of reasons such as preparing for sale, share gifts to staff, disputes (both shareholder and matrimonial). Therefore, I’m often asked by clients “how much is my business worth?”. However, disappointingly for some, this is not a simple process or calculation. Many variables need to be explored and evaluated before a value can be established, such as:

Financial variables

  • Debt
  • Cash
  • Recurring income
  • Sales pipeline
  • Profit
  • Assets
  • Liabilities

Non-financial variables

  • Management team
  • Research and development (new products)
  • Location
  • Brand
  • Industry

An opinion has to be taken on each of the above and formulated into an intrinsic valuation by evaluating the importance of each factor in relation to the business, weighting them in in order of significance.

As well as being a complicated process it can also be difficult to communicate to business owners who may not agree with an independent valuation particularly in owner-managed companies.

Should you require a business valuation, please get in touch as it should be the first step in formalising a succession plan.

For further information on this blog post, please contact our corporate finance specialist Tom O’Brien.