How do you value a professional service company?
Company valuations can take multiple forms – ranging from asset pricing, liquidation or book estimate, the discounted modelling of future income streams through to sector-specific rules of thumb. When it comes to professional service businesses, however, one mechanism dominates. Simply put …
What to look for in a valuation of a business?
Valuation analysts might also look at the headline revenues of sold businesses but this is typically only done as a crude proxy when they do not have access to all the financial detail … and suspect that the reported earning figures are not an accurate representation of actual levels of discretionary cash flow.
What makes a company a professional service firm?
When it comes to professional service businesses, however, one mechanism dominates. Simply put … The valuation of professional services firms is driven by the expectation of future profit.
When to be involved in a value negotiation?
Key point. A buyer is, however, never expecting static growth and, as such, you are only likely to be involved in any such value negotiation if, and only if, your company has demonstrated multiple years (three at least) of clear profit growth trajectory.
How do you value a professional service business?
There are a number of valuation methods used to value companies generally – ranging from asset valuation, liquidation or book value, the modelling of future income streams through to industry-specific ‘rules of thumb’. When it comes to professional services businesses, however, one viewpoint comes to the fore. Simply put …
How to value a professional service business Dom Moorhouse?
Figure – Illustrative EBITDA multiples a financier would be willing to pay based on a three-year payback period (against a range of projected annual EBITDA growth rates)
Why are valuations important for professional services businesses?
When it comes to professional services businesses, however, one viewpoint comes to the fore. Simply put … Valuation is driven by the expectation of future profit.
Which is the best way to value a business?
Valuation is driven by the expectation of future profit. That is, a buyer is primarily interested in the total amount of ‘Owner Benefit’ they can extract in the future based on a business’ historical trading performance and its current organisational capabilities. As such, the most common valuation method is a variant of: Profit x Multiple