Valuation
Valuation is an Art, not a Science!
Business pricing is more an art than a science. Sellers who tend to look at the big picture, like the deal structure and pricing, are usually more successful in selling their business. One of the reasons why business valuation is so complicated is that there is no standard methodology available to value small businesses for sale.
The actual value of your business is the amount that someone is willing to pay for in the business-to-sale marketplace. Personal feelings about your company’s value are far less important than accurate documentation and other factors that could potentially influence value. It is important for sellers to recognize that the main reason buyers purchase is the return on investment (ROI).
At the end of the day, all buyers are seeking to make a profit from their purchase by obtaining an appropriate ROI, so it is very important for the seller to have a successful exit plan considered from the buyer’s point of view.
Our Valuation Report scope will cover the following:
- Studying historical financials of the business
- Any future Capex – thoroughly vet your costs and verify the same as well as the timeline of implementation and cash flow allocation.
- Identification of key metrics/ drivers applicable for the business based on the discussion in the initial call/ meeting and apply the same for financial projections
- List of key assumptions
- GST and taxation structure explanation
- Estimation of overheads
- Contingency plans for change in the costs
- Reviewing/Making the financial projections required for valuation purpose
- Wherever identified, during the process of the valuation, suggest for suitable cost-efficient or value-generating ideas from a financial perspective
- What is the value of the company (basically, based on the company’s potential, what reasonable offer can be expected from a reasonable buyer)? This also translates into how to calculate the value, the methodology, what does the value discounts, and what forms the part of purchase consideration? That is what all items from the balance sheet are taken over.
- What do the investors or strategic acquirers value and how to maximize the value of the firm. This deals with how to add strategic value to the business, how to build the balance sheet so that the investment or acquisition proposal as a whole looks strong enough to command a considerable premium.
- The deal structuring, with following alternatives along with terms of the practical options you have now and options you can open up in future with constructive effort along with practical valuations associated with all these options so that you can take an informed decision over the fate of your company:
- A complete 100% acquisition, what will be Purchase consideration here, what will be the handover period and responsibilities. ( Here you are handing over the management, this will have ramifications on the overall deal)
- A partial but substantial stake sale – 40-49% stake sale. Again the Purchase consideration and the management responsibilities here. ( Here you are retaining majority but bringing in a constructive partner, this will maintain your responsibility in terms of the management but also give you the diversification and a strong partner to grow the company faster)
- A partial non-substantial stake sale – up to – 20%. ( Here you are selling a strategic investment, here you will get diversification plus absolute control of the company)
- A funding proposal, here whatever money comes in, it goes to the company. The promoters get diluted. The valuation will likely be on a higher side as this kind of deal shows the management and promoters confidence in the company. ( Here the company will grow much faster to a higher valuation range which will benefit both the promoters and the investor)
- Detailed dashboards of PNL, Balance sheet, cash flow, and summary sheet
- Guidance on key areas for the financial success of the business
Why Choose Apophis
Our Experience – We have advised more than 500 SMEs & Startups for preparation of their Pitch Decks and Information Memorandum during the fundraising process
Our Expert Advice & Recommendations – We shall not only assist you with the preparation of the pitch deck but also advise you on business model changes needed such that we pitch it right to investors
Our Highly Affordable Pricing – Our in house team of experts and advisors will help you in the preparation of a high-end pitch deck at very competitive pricing in the market
To understand what procedure we follow in formulating a business valuation and how it may be beneficial for your company in specific, write to us at info@apophistechno.com
