Frequently Asked Questions
What kind of deal structure is assumed in the valuation?
This valuation report assumes a cash at closing deal. In a deal where there is owner financing, earn-outs, or other ways that risk is reduced for the buyer the total purchase price can be higher. If you have questions about how a particular deal structure might affect the valuation, please contact us.
Our valuation methodology also assumes that the owner is selling a controlling interest in the company. If the buyer receives less than a controlling interest there may be a discount for lack of control and other factors that affect the sale price.
How long will it take me to value my company?
The process is designed to take between 5 and 15 minutes from start to finish.
Why don't you produce valuations for companies with annual sales greater than $20,000,000 or annual profits greater than $5,000,000?
When sales exceed $20,000,000 or profits exceed $5,000,000 there will be interest from Private Equity Groups and other buyers to acquire the business as a platform company and build it for IPO or future sale. While the valuation software can adjust for size, when a company gets that large we believe that a person with knowledge of the market does a superior job.
Why do you value my company based on its past performance instead of my projections of the future?
Any projection of the future is likely to be greeted skeptically by a buyer. In our experience, buyers will that future growth will come form the buyer's hard work and from risking the buyer's capital and so will usually pay only for what the business historically produced before the buyer took over.
We ask about and use projections in our analysis, but the bulk of the valuation is based on past performance. Our approach also gives more weight to projections based on tangible evidence (a backlog of business for which there are signed contracts) than for projections that are based on management expectations.
What about projected synergies with an acquiring company?
An acquiring company will generally view cost savings as a result of synergies, similarly to increases in profits; as a result of their hard work and capital. They will not pay for the value of the company that results from their hard work but for the value of what you have built. Occasionally a company may pay a premium for a related company, but generally the premium is 5-10% over the market price.
Is this valuation valid for a merger?
No. In a merger where existing owners become part of the new company there are a number of factors that affect the value of the new entity. Please see our blog entry on why valuation in a merger may be different from that in an acquisition for a more complete explanation.
What if I have a problem during the process?
If you have a question that is not answered please contact us.
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