Business valuation
What is your business worth?
What the fool will pay for it, you sometimes hear. But it is not a bad idea to take a good look at it. Because the value of your company is determined by many different factors. Also, your company is not the other and there are many valuation models and practical examples. As a general rule, for valuation purposes, you look at the profit/cash flow being realized and what the expectation is for the future. In doing so, you assess the risk on that cash flow. Could it be less or more and how certain are we of that? Those components affect the value of your business.
Methods for
business valuation
To value a business, there are several methods. The most commonly used method is the discounted cash flow (DCF method), a calculation of the expected future cash flows. This involves a vision of a company's future earnings as well as a vision of its risk profile. The higher the profit expectations and the lower the risk profile, the more attractive your company is.
"In practice, we often look at multiples "
In practice, we often look at multiples. This looks at the realized sales value or market capitalization of similar companies in the market relative to their profitability. But one company is not the other. For example, one company is in a fast-growing industry, while another operates in an industry that is highly dependent on the business cycle.
With our track record and knowledge of the market, we know what will be paid for a business by buying parties. And what is paid is ultimately related to the vision of your company's future development.
To determine the value of your business, the first important measure is EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization. This measure represents your company's cash-generating capacity, regardless of your capital structure. This is therefore a measure of the vitality of your company. The determination of sustainable (normalized) EBITDA is multiplied by a "multiple" that you, the entrepreneur, negotiate with the investor.
Highest price or
the best deal?
Of course, we are constantly asked, "What do you think my company is worth? Based on core information and our experience, we can give a value indication. Sometimes entrepreneurs give a target amount for selling their business. We test whether this is realistic and commit if we believe in it. In many cases the highest price is decisive, but is that always the best deal?
Sometimes a person just wants to retire and sell the business for a good price. But not every business owner thinks the maximum price is the ultimate goal. It's also important to look at "What kind of buying party is this?", "What will they do with my business?" "Will the employees keep their jobs? And from a technical perspective, "How will the acquisition be structured?
Every entrepreneur has different needs and interests. One person wants to sell his entire company, while another wants to secure a piece of capital in the meantime, but still has the energy and time to continue doing business. In the latter case, a pre-exit is attractive, where the added value into the future can make all the difference.
We think it's important for you as the seller to have a good understanding of what's happening, to understand the implications and risks, and to know what you're looking at. There may be a high amount on the bill of sale, but it's important that the deal is right across all axes. Both business and personal.
What sets us apart is that we put you in the best possible position to make the best possible choice. We make sure you understand what this means for you, your vision and your business, and that you really stand behind your decision. Because ultimately, that's the choice you make for yourself.
"We make sure you understand what this means for you, your vision and your business and that you really stand behind your decision."
What do we want to do for you?
Hogenhouck is an entrepreneurial and independent M&A firm, where you as a client always come first. Every entrepreneur, every business and every transaction is different; hence our credo "Business as unusual.
As M&A specialists, we work on life achievements built with blood, sweat and tears. Our mission is to move the people behind these achievements forward, both professionally and personally. That is what drives and inspires us. Because at the bottom line, for us, it's not just the numbers that count.
You are at the center of everything
As a client, you are at the center of everything. Guiding the sale of your company, the purchase of a business or attracting the right investor means helping you take charge of your future. That's why we think it's important to know how you envision it. We want to get to know and understand you. To know where for you the balance lies between your business considerations and your personal interests.
An approach that leads to results
We focus on lasting results. You don't engage with us for a quick deal, but to take a good step. 'Just what is that step and when and how should you take it?' In the process we engage, we pull together as a team. We complement your knowledge and experience with our knowledge of markets, market players and negotiations and boast an M&A track record of over 15 years. We guide you through the world behind the numbers you don't know, where everyone wants something from you, and put you in the best possible position in buying, selling and funding.
