Don’t bother with a free company valuation – they’re as useful as a chocolate teapot!
Valuations are always subjective and involve considerable professional judgement. No two companies are the same, and no two valuations should be the same.
How not to value your business
We sometimes meet shareholders who believe they already have a feel for the value of their company, despite not having taken specialist advice. Unfortunately, without insight from a thorough, commercial valuation, shareholders can be under a false, and frequently unrealistic illusion about what their business is worth and how saleable it is.
There are many ways in which business owners can attempt to establish ‘a value’ for their company, none of which provide a reliable, meaningful or justifiable outcome. Accurate valuations cannot be found by:
- Entering profit data into a formula, such as those used by online value calculators;
- Getting a quick “free of charge” company valuation;
- Comparison to an apparently similar company up the road; or
- Seeking the opinion of a professional adviser with minimal deal experience.
Sadly, some advisers motivated by the prospect of securing a company sale mandate can be tempted to flatter shareholders by providing exaggerated and over-inflated valuations, which are unattainable in the real world. Over-promising on value to win advisory work gives shareholders false hope of what may be possible, raises their aspirations to an unrealistic level, and typically culminates in great disappointment or worse still, the company not being sold. This is not our approach!