A Simple Way to Get the Highest Value for Your Company
Valuing a business is important when selling or seeking financing. But picking the right professional is key. This step-by-step guide will help you maximise what your company is worth.
Define Your Valuation Needs
The first thing to do is understand why you need a valuation. Are you looking to:
Selling Your Business
If you intend to sell your company, the valuation will establish an asking price range that maximises sale value but still appears fair to prospective buyers. It’s best to value a business that is performing well and has a proven financials/track record.
Getting a Bank Loan
Banks may need a valuation to understand a company’s collateral strength before approving a business loan. Valuers can assess the company’s revenue/profit potential and asset base to gauge creditworthiness. This helps banks mitigate risk.
Attracting Investors
For fundraising from angel investors or venture capitalists, the valuation determines pre-money valuation or the price per share of new equity issued. It provides confidence to investors on potential returns from financing your growth plans.
Legal Dispute Resolution
In disputes over shareholder exit, marital separation or buyout negotiations gone wrong, an independent valuation establishes reasonable compensation terms based on facts/figures rather than ego/emotions. This facilitates out-of-court settlements.
Your Unique Timeline
Give valuers your anticipated deal/litigation timeline so the report is ready when needed, factoring data collection or further analyses required. Rush jobs may compromise quality. Staggered deadlines aid comprehensive, meticulous valuations.
The key is conveying exactly why you need a valuation – whether for strategic financial planning or urgent legal/deal closure purposes. This context guides choosing suitable valuation professionals and methodologies specialised to your core objective.
Research Valuation Methods
There are three main approaches valuers use:
1. Market Comparison Method
Also called market multiples method. Valuers look at financial ratios or metrics like price-to-earnings or EV/EBITDA of comparable publicly traded firms. Adjustments are made for differences like size, growth rates, profitability etc. Better for established businesses.
2. Asset-Based Method
Each tangible asset like equipment, vehicles, property, inventory etc is appraised at fair market value usually based on condition. Intangible assets like brand, patents, customer lists are valued too using cost or income approaches. Provides orderly liquidation baseline.
3. Discounted Cash Flow Method
Projected income statements are made assuming business continues as a going concern. Distributable cash flows are calculated and discounted using a risk-adjusted rate to get a net present value. Subject to most assumptions but suited for stable growing companies.
Generally, DCF gives the highest value indication followed by market method. Choose based on strengths of each – market data availability, age, profitability, sector norms. A blended approach incorporating techniques is also common to triangulate accuracy. Discuss trade-offs with valuers upfront.
Valuation is both an art and science. Selecting the most representative methodology, grounded in your company’s context and industry benchmarks is important for a reliable, defensible figure.
Gather Company Documents
Provide valuers with essential records like financial statements, contracts, asset lists, and tax returns. The more complete the information, the more accurate the valuation will be. Stay organised!
Evaluate Potential Valuers
Experience is crucial when valuing businesses. Check valuers are accredited by recognized bodies like the ASA or RICS. Make sure they know your industry inside out too. Read online reviews from past clients.
Request Proposals
Get quotes from top valuers in Dubai. Compare fees, timelines, deliverables, and payment terms. Reputable firms like Horizon Biz Consultancy offer transparent engagements. Sign on the dotted line once you’re clear on costs.
Participate Fully
Work closely with the chosen valuer. Answer queries promptly. Share key financials and details of past sale deals involving similar companies. Help provide all context needed to comprehensively understand your company’s worth.
Conclusion
By carefully following these steps – defining your goals, researching methodologies, preparing documentation, selecting experienced valuers, clarifying contracts and fully participating in the process – you can rest assured of getting an impartial, data-driven valuation that reflects your company’s true worth.
FAQs
Most valuers aim to deliver reports within 2-4 weeks if provided all requisite information and documents on time.
Highly reputed firms in the UAE include Horizon Biz Consultancy, ValuStrat and BizConsult. They have decades of combined experience valuing businesses across sectors.
A business valuation is the process of determining the economic value of a company or business entity. It is crucial for various purposes, such as mergers and acquisitions, ownership transfers, tax planning, and raising capital.
Common valuation methods used in Dubai include the asset-based approach, income-based approach (discounted cash flow), market-based approach (comparable transactions), and hybrid methods that combine multiple approaches.
The cost of hiring a business valuer in Dubai can vary significantly depending on factors such as the valuer’s expertise, the size and complexity of the business, the scope of the valuation, and the urgency of the assignment. It is advisable to obtain quotes from multiple valuers and compare their fees and services.
