A discussion regarding valuation is one of the most important steps in the sale of a business. It establishes a realistic expectation of current market conditions. While your business means a lot to you, potential buyers may have a very different opinion. Prior to going to market, Romaco Group will give you a realistic picture of what your business is worth in today’s market.
Truth be told, a business’ value is in the eye of the beholder, therefore, it’s our job as your M&A advisor to execute a strong marketing plan that yields several qualified buyers that are motivated to acquire your company for the highest possible purchase price and at terms that are equally as favorable.
How is Valuation Determined?
You may have heard some rules of thumb for your industry – a multiple of this or a multiple of that. Be cautioned that taking a number or two out of context may have you believing your business is worth considerably more or considerably less than the actual market. Additionally, understanding whether your company will be on the high end or low end of a particular industry’s range is also critically important.
All valuations done by the Romaco Group are for the purposes of marketing the business for sale, either today or as a baseline for future planning. Our valuation process is very detailed and includes gathering several years of corporate financials, asset and inventory lists, data on recent transactions and researching your market sector.
Aside from the cash flows and hard assets, each business has a unique combination of factors that determine its value.
Some of the most common are:
- Strength and depth of the management team
- Customer concentration and retention
- Long-term or recurring contracts verses project based revenues
- Intellectual Property or other competitive advantages
- Industry growth potential
- Barriers to entry
- Exclusivity in customer or supplier agreements
- Regulatory and Licensing requirements
How can Romaco help?
Armed with realistic expectations of the probable selling price range for your business, you can determine if now is the right time to sell your company. If market conditions do not match your expectations, and time permits, our advisors can make recommendations for improving your valuation and reducing perceived risks by potential investors.