A successful business valuation depends on thorough preparation. By following these guidelines, small business owners can maximize accuracy, gain valuable insights, and highlight the true worth of their businesses.
Why Preparation Matters
• Accuracy and Clarity: Well-prepared data ensures precise results.
• Time Efficiency: Streamlined documentation saves time during the process.
• Strategic Insight: Reveals key value drivers and areas for improvement.
Even if your financials aren’t perfectly organized, Tabulate’s team can help. We assist with organizing records, clarifying financial data, and simplifying complex accounts.
Gather Financial Documentation
Organized financial records form the backbone of any valuation. Essential documents include:
• Profit & Loss Statements: At least three years of performance data.
• Balance Sheets: A snapshot of assets, liabilities, and equity.
• Cash Flow Statements: Insights into cash inflows and outflows.
• Tax Returns: Verified financial history.
Adjust for One-Time and Discretionary Expenses
To reflect sustainable earnings, identify and separate:
• Owner Compensation Adjustments: Align salaries with market standards.
• Non-Recurring Costs: Exclude one-time expenses, such as legal fees.
• Personal Expenses: Remove any personal costs included in business accounts.
Understand Your Industry’s Market Conditions
Contextualize your business’s performance by researching:
• Benchmark Comparables: Learn how similar businesses are valued.
• Market Position: Assess your competitive edge.
• Economic Factors: Understand trends affecting your industry.
Perform an Internal Audit
An internal review ensures your financial and operational practices align with valuation standards:
• Verify Financial Accuracy: Cross-check for inconsistencies.
• Assess Efficiency: Identify and address operational inefficiencies.
• Spot Risk Areas: Understand potential liabilities.
Review Key Business Metrics
Metrics that highlight your growth potential include:
• Revenue and Profit Trends: Consistency indicates stability.
• EBITDA: A critical profitability measure.
• Customer Retention Rates: Stability and growth potential.
Prepare a List of Tangible and Intangible Assets
Comprehensive asset documentation strengthens your valuation:
• Tangible Assets: Equipment, property, inventory.
• Intangible Assets: Trademarks, patents, brand value, client lists.
• Intellectual Property: Include proprietary processes or technology.
Engage with Stakeholders
Collaborate with key stakeholders to align on valuation goals:
• Owners and Executives: Define objectives and expectations.
• Financial Advisors: Optimize financial documentation.
• Legal Advisors: Ensure legal compliance.
Set Clear Valuation Goals
Tailor your valuation to your specific objectives, such as:
• Exit Planning: Determine a fair sale price.
• Growth Strategy: Guide expansion with clear insights.
• Financing: Strengthen funding applications.
• Tax and Estate Planning: Align with long-term goals.
Know Relevant Valuation Methods
Understanding the methods your valuation provider may use helps set expectations:
• Income-Based Approach: Focuses on earnings potential.
• Market-Based Approach: Compares with similar companies.
• Asset-Based Approach: Values the sum of all assets.
Final Review and Organize Documentation
Ensure all documentation is ready for review:
• File Organization: Arrange financials, contracts, and assets logically.
• Digital Copies: Secure digital versions for sharing.
• Checklist: Confirm all necessary data is prepared.
Working with Tabulate for a Smooth Valuation Process
Tabulate provides expert guidance and clear communication to simplify your valuation journey:
• Dedicated Client Success Manager: A single point of contact for support.
• Transparent Process: Defined timelines and expectations.
• Comprehensive Final Report: Actionable insights for long-term success.
Ready to Start?
Contact Tabulate today to schedule your consultation and begin your valuation journey with confidence