1. Consult the right people. Although local accountants, valuation firms and investment banking firms can all handle valuations, the right choice for your business depends in part on why you need to value the company.
To get the most accurate valuation, you need someone who can do more than add numbers you should identify someone who is a subject matter expert on your business.
2. Understand your competition. A valuation can help you estimate your competitive brand advantage — or lack of it.
3. Evaluate your growth potential. Traditional valuation methods look at revenue, net income and profit, or earnings before interest, taxes, depreciation and amortization. A business valuation also typically includes a five-year growth forecast.
4. Consider both quantitative and qualitative indicators by asking questions like “Is the business one that requires a significant amount of investment for it to continue to grow? What kind of capital allocation needs to be set aside down the road that will have an impact on what someone is going to pay for the business?”
5. Understand your key risks. A business valuation typically accentuates the positives, but it should also identify negatives that could reduce a company’s value.