Business valuation
What is your business worth?
Whatever you can get for it, or at least so they say. But it doesn’t hurt to really think this through. After all, the value of your business is determined by many factors. Moreover, your company is unique, and there are many valuation models and real-world examples. Generally, for valuation purposes, people tend to consider the profit/cash flow being realised and the expectation for the future. This also involves assessing risks to that cash flow. Might it decrease or increase, and how sure can we be of that? Together, these two components combined determine the value of your business.
Methods for
business valuation
There are several methods for business valuation. The most commonly-used method is the discounted cash flow (DCF) method, a mathematical calculation of future cash flows. This involves a vision of a company’s future earnings and a vision of its risk profile. The higher the earnings expectations and the lower the risk profile, the more attractive your business will be.
‘Multiples are often used as a guideline for valuation’
Multiples are often used as a guideline for valuation This includes the realised enterprise value or market capitalisation of similar companies relative to their profitability. However, no two companies are the same. One company may be 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 parties will be willing to pay for a certain type of business. The ultimate price often depends on the vision of your company’s future development.
To determine the value of your company, the EBITDA metric, or Earnings Before Interest, Taxes, Depreciation and Amortisation, is the first important factor. This calculation reflects your company’s cash-generating capacity. As such, it is a measure of your company’s vitality. The outcome of EBITDA is based on a ‘multiple’ that you agree on with the buyer.
The highest price or
the best deal?
Understandably, people are always asking us: ‘What do you think “they” will pay for my business?’ Based on our experience, we can give you a guideline based on core information that we use for this purpose. Sometimes, business owners will set a certain target amount they want to realise when selling their business. We assess and test that number and, if the number is realistic, we go for it. In many cases, the highest price is the deciding factor, but whether that is always the best deal remains to be seen.
Sometimes an entrepreneur simply wants to retire and sell the business for a decent price. Then again, not every entrepreneur sees the highest price as their ultimate goal. Other important matters to consider include questions like, ‘Who is the buying party?’ ‘What are they planning to do with my business?’ ‘Will my employees keep their jobs?’ And, on the technical side: ‘How will a sale be structured?’
Every entrepreneur has different interests. One person may want to sell their entire business, while another is keen to safeguard their pension pot but still has enough energy and time to continue in business. In the latter case, a part of the business is sold and the reinvestment is just as interesting.This is when a pre-exit becomes interesting.
We think it’s important for you as the seller to really fathom what is happening, to understand the implications and risks, and to know what you are looking at. After all, what good is a high amount on the deed of sale, but it is important that the transaction is attractive from all perspectives. Both business and personal.
What sets us apart is that we put you in the best possible position to make the optimum choice. We make sure that you understand what this means for you, your vision and your business, and that you can really be confident about your decision. After all, that is ultimately the choice you make.
‘We make sure that you understand what this means for you, your vision and your business, so that you can really be confident about your decision.’
What do we want to do for you?
Hogenhouck is an enterprising and independent M&A firm, where you as a client always come first. We believe that every entrepreneur, every business and every transaction is different, a philosophy which inspired our motto: ‘Business as unusual’.
As M&A specialists, we work on projects to which people have dedicated their lives—projects built through blood, sweat and tears. Our mission is to help the people behind these achievements move forward, both professionally and personally. This is what drives and inspires us. After all, when all is said and done, what really counts means more than numbers alone.
You are at the center of everything we do
As a client, you are at the center of everything. Guiding you through the sale of your business, the acquisition of a business, and bringing in the right investor, means helping you take charge of your future. That’s why it is important that we know how you envision your future. We want to get to know and understand you. We want to know about your ideal balance between your business considerations and your personal interests.
An approach that yields results
We focus on sustainable results. Working with us is not for a quick deal, but to make a solid decision and a good move. ‘Just what is that next step and when and how should you start taking it?’ We come together as a team for the process that we are starting. We complement your knowledge with our expertise of markets, market players and negotiations, along with a positive M&A track record that has been going strong for over fifteen years. We guide our clients through the world behind the numbers, which they don’t always know as well as they might expect, and where everyone is going to want something from them, and put them in the best possible position to buy, sell and fund.
'With the right figures, we can also bring the right facts to the surface.'
Hein Stoops
