We help entrepreneurs discover how much their business is worth.
Companies with unique revenue models, geographically dispersed clients, and rapid growth require curated valuations. Most banks and M&A teams don’t have a true understanding of what impacts the valuation of these businesses. Did we mention getting a formal valuation the “old school” way can take months? We know this doesn’t work, so we decided to do something about it.
We’ve developed a proprietary algorithm that accurately measures the financial and non-financial factors that impact a business’s value. With unparalleled industry expertise and unmatched access to market comps, we’re able to provide the most accurate business valuations to entrepreneurs of all shapes and sizes.
We outline the factors that go into a valuation.
One-Time Project vs Revenue:
The way your business makes money and the structure of those contracts is an important piece of the valuation puzzle. Recurring revenue-based businesses sell on the higher end of the valuation range, whereas one-time project-based businesses sell on the lower end.
Niche:
If your company has a specialization in a certain industry or if the service offering you provide is uber-specific, you’ll be more sought after by buyers – which puts you on the higher end of the valuation spectrum.
Business Type:
The type of business has a big impact on where you fall within the valuation range. Those industries which are reviewed as recession proof and have consistently performed during historical economic downturns are more valuable to buyers than up-and-coming industries or those significantly impacted if the market takes a hit.
Management Structure:
For businesses of any size, the structure of the management and leadership team is a crucial valuation factor. A robust management team (assuming they will stay on board post-transaction) will be considered valuable to a buyer.
Scalability & Growth Potential:
Having a business that can strategically grow its revenue or EBITDA is a crucial factor for determining valuation. Showing that your business historically has, and can continue to, keep up with market demands, improve efficiency, and increase profit margins is an important piece of the valuation pie.
Business Development Process:
The more well-defined the business development process within your company, the higher your valuation. Ideally, your business has a solid strategy behind both inbound and outbound sales. If you’re relying strictly on word-of-mouth and your stellar reputation, this has a negative impact on your valuation.
Client Concentration:
If you have a client that makes up more than 10% of your total revenue, this will have a negative impact on your valuation and you ’ll find yourself on the lower end of the valuation spectrum
Client Retention:
If you have clients that have been with your company for quite some time, and you can clearly identify your churn rate, awesome! This has a positive impact on your valuation. If you’re constantly churning and burning through clients, more focused on getting the next client than keeping your current clients happy, this will have a negative impact on your valuation.
Reputation:
What does someone see when they Google you or your company? What do your clients and employees think of your business? Having a stellar reputation in your desired market has a positive impact on your business valuation.
Transition Plan:
Buyers want to purchase businesses from sellers who believe in the long-term viability of the company. If you’re a seller who wants to be completely out of the business in 90 days, this can have a negative impact on your valuation. If you’re open to a longer transition plan, this will have a positive impact on your valuation.
The “old school” process for valuing businesses wasn’t working, so we’re rewrote the playbook.
Understanding the value of your business is the core of an acquisition strategy. It allows founders to identify the most strategic time to sell and offers a benchmark for understanding the financial return on your countless hours of hard work.
Step 1: Kick-Off Call
We want to understand the full picture – what makes your business so successful? Meet with our team to share the story of your business and help us craft the narrative around your value proposition for potential buyers. We’ll review how businesses are valued to ensure you are armed with all the information you need to understand your value in the market.
Step 2: Determine Adjusted EBITDA
Our team will analyze your financial data to develop an adjusted EBITDA considering any add-backs, one-time costs, owner’s expenses running through the business, and any other outstanding factors to ensure you are getting the highest return for your hard work.
Step 3: Determine Multiple
We assess your business’s qualitative factors from our kick-off conversation to determine where you fall in the multiple range. Attributes considered include:
Founder Transition Timeline
Revenue Structure
Service & Industry Niche
Management Structure
Scalability & Growth Potential
Step 4: Prepare Valuation Materials
We put our findings into a detailed visual presentation to showcase your business’s value and arm you with the knowledge you need to make strategic decisions for an acquisition. Presentation documents include:
Financial Summary & Valuation – We take a deep dive of the quantitative factors that impact your valuation and determine the best-fit multiple for your go-to-market strategy.
Business Scorecard – We discuss the unique qualitative factors that make up your business and contribute to the valuation multiple.
So, what's next?
We're here to help you explore what next step best fits your business goals.
Relationships Come First
At Barney, relationships are our most precious resource. We support entrepreneurs for the entirety of their business lives, from start-up or purchase through a sale or strategic exit. We’re more than business brokers, we’re strategic partners that believe in being boldly different.