Small Business Valuation

Small Business Valuation is the defining dimension of measuring your organizational success. The reasoning behind obtaining a Business Valuation may be as complicated as a divorce, shareholder disputes, buying or selling a business, raising capital, required documentation for a shareholder agreement, or understanding what an exit could look like for you. Valuations are also a good way to see how your investments have panned a year out. Ultimately, valuations affect every aspect of your business. Market Valuations are the best arbiter of your business success in that given year, and thus they are critical to the business decision making process. Valuations are an overall health analysis of your business and can inform of how healthy your organization is and how healthy it needs to become to be sold in the market place. Whenever individuals come to HafeziCapital to review their business valuation, they have a lot of questions that need to be answered.

Some of the typical questions are:

  1. What is my Business’ Valuation?
  2. How much is the Company worth that I am buying?
  3. How much can I sell the Company for?
  4. How much have my competitors sold/bought for?
  5. What is a REAL multiple for my business?
  6. What are the market effects on the price of my company?
  7. What is a reasonable price to pay for the company I am buying?
  8. How can I increase the value of my business?
  9. How much is my Company worth if I sell a business unit?
  10. How much is my Company worth in a merger?

Individuals invest in an asset class, with clear intentions to grow the value of the asset above the capital invested, risks associated with the investment, and the time value of money. For most small and medium businesses, it is also a retirement objective. Business Valuation allows owners to obtain a snapshot in time as to where they are with their investment. For many small businesses their business is their largest investment, thus knowing where they are at with the value will help them define the exit for the company. Ultimately, value is a particularly helpful measure of performance given that it takes into account the long-term interests of stakeholders within a Company.

Small Business Valuation Reports

HafeziCapital’s Business valuation team analyzes and produces two different reports based on the specific needs of your business. They are Long Form Business Valuation is a detailed analysis of the value with a detailed market analysis, comparable analysis and cash flow normalization of the Company. The Snapshot Business Valuation is a simple two-page analysis of the firm with less detail and a valuation based on a price range.

Long Form Business Valuation

Who should get a Long Form Business Valuation?

If an organization is:

  1. Buying a Business or Business Unit
  2. Selling a Business or Business Unit
  3. Merging with another company
  4. involved in Shareholder disputes
  5. in need of Shareholder Financial Updates
  6. in need of an Annual Valuation as a Key Performance Indicator (KPI)
  7. Capital Raising
  8. Divorce
  9. required documentation for a shareholder agreement

HafeziCapital’s Long Form Business Valuation report. Such reports include Economic Review and Outlook, Industry Review and Outlook, Financial Review, Financial Ratio’s and Projections, and the Valuation and the methods used to determine the value of the organization. This requires a detailed analysis of the organization, interviews, review of the Company’s balance sheet, income statement, and cash flow analysis. HafeziCapital has to understand the business the company is in, its client base, and potential growth objectives. HafeziCapital’s Business Valuation team must also understand the assets the organization owns that will affect the valuation of the company. If the company is within the Government Contracting space, understanding the values of the contracts and options of the contracts. These types of engagements are very detailed and thorough and require on average 30 business days to implement.

Snapshot Business Valuation

Who should get a Snapshot Business Valuation?

If an organization is:

  1. Small Business with revenues of less than $100,000 a year
  2. Small Business acquiring another Small Business (>$100,000)
  3. Planning a 3-5 year exit
  4. New Shareholder based Incorporations
  5. required documentation for a shareholder agreement

This type of report is a two-page quick valuation of the company for the organization with limited requirements. The Snapshot Business Valuation is a “ballpark” estimate of where the organization is today. For owners and shareholders, this can be an easy way to measure the performance of the organization or set annual goals. Snapshot valuations are great for as part of the planning process for a 3-5 year retirement or exit strategy.  The turn around time for Snapshot valuation reports is typically 7 business days.

Obtaining High Multiples

Business Valuation is impacted by Price Premium for their products and/or services. Price Premiums are defined as customers willing to pay more for your product or service, given the perceived value provided. Given that Price Premiums impact organizational Cash Flows, they also impact the valuation of a firm. Buyers would be willing to pay more for a perceived higher quality company. When HafeziCapital is implementing a Business Valuation analysis, we review and analyze the pricing power of corporations and thus take Price Premium into account where we believe it impacts valuations.

A great example of Price Premium is differentiating a company such as Apple with Dell Computers. Whereas Apple is a software maker and a product design firm, Dell is mostly an aggregator with some design elements. Dell laptops are generally cheaper in price than Apple’s although they produce a larger volume of product offerings in the laptop and server space. The correct market also has placed a larger value on Apple than on Dell.

Growing via Business Valuation

HafeziCapital’s consulting arm can help the organization can increase the value of their business. The analysis will allow organizations to see where they are at and what changes they and what changes they can implement to increase business valuation. The analysis can include a benchmarking versus competitors within your industry (based on available data), and understanding what changes you need to make to increase the value and the multiple within the industry. This approach is a customized analysis allowing you to easily understand what changes can lead to potentially more value for your business.

Contact us today to obtaining a Valuation for your Business!

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