A Typical Valuation Process

Phase 1.  Understand Your Needs

Client needs vary in every valuation assignment. In our initial conversation we will identify the problem you are trying to solve and your circumstances to determine the appropriate scope of work. We will discuss …

  1. Business to be valued: name, type, background, entity, ownership
  2. Financial highlights: revenue, earnings, trend, major assets & liabilities
  3. Use of the valuation
  4. Interest to value (100% or fractional)
  5. Appropriate standard of value
  6. Transfer restrictions
  7. Date of valuation
  8. Whether real estate or asset appraisals may be needed
  9. Appropriate scope of analysis
  10. Report needs
  11. Intended users of the report
  12. Identify the client
  13. Deadlines and desired timeframe
  14. Access to business information
  15. Unique circumstances, factors to consider or challenges

We hold your information in the strictest confidence and use it only to propose the right valuation services for your needs.  We will also consider any conflicts of interest and our ability to perform the engagement.

With this information, and occasionally after some preliminary research, we can estimate our time and cost to do the work and provide an engagement letter. As soon as we are engaged we can go to work.

Phase 2.  Discovery

  • Gather and compile requested documents (a document request will be included with our engagement letter)
  • Provide profile questions or schedule a management interview
  • Visit the business, review operations, conduct management interviews
  • Obtain relevant third-party data

Phase 3.  Research & Analysis

  • Review and synthesize business information
  • Research and analyze economic data
  • Research and analyze the industry and market in which the business operates
  • Analyze company financial data:
    • Enter 4-6 years financial statement detail
    • Reformat financial information
    • Obtain client input and make "normalization" adjustments
    • Analyze business financial condition, performance and trends
    • Calculate appropriate financial metrics and relevant financial ratios
    • Obtain industry financial data and compare performance
  • Identify and assess key business value drivers and risk factors
  • Analyze management’s financial forecast and assumptions, or develop a forecast
  • Resolve remaining questions regarding history, operations, outlook, market environment, financials, adjustments, assumptions
  • Analyze risks, privileges and restrictions of the specific interest being valued

Phase 4.  Apply Valuation Methods

  • Consider all possible valuation approaches and methods and select those most likely to yield meaningful indications of value for the subject
  • Market Approach:
    • Determine guideline company criteria
    • Using multiple sources, research and collect public and/or private guideline company business and transaction data
    • Analyze guideline company similarities and differences; refine
    • Analyze statistically and calculate appropriate market multiples: price/earnings, price/revenue, price/book value, etc.
    • Choose the best price multiple(s) for the subject company
    • Develop indications of value
  • Income Approach:
    • Select appropriate methods, which may include discounted cash flows, excess earnings, and one or more capitalization of earnings methods
    • Apply these methods using appropriate benefit streams and discount and capitalization rates, based on the above research and analysis
  • Cost Approach:
    • Adjusted Book Value or Liquidation Value
    • May require separate real estate or equipment appraisals
  • Consider and apply appropriate premiums and discounts to values indicated by the above methods. For minority interests, consider control and marketability attributes.
  • Each valuation method produces a somewhat different result, which is expected since they each view a business from a different perspective. Review these results and decide how much influence each should have in the value conclusion.
  • Apply tests for the reasonableness of the value conclusion

Phase 5.  Produce the Report

  • The final step is to write an understandable report in the agreed upon format for the intended users that presents the relevant facts, explains the analysis and procedures used, and provides supporting evidence for conclusions.
  • Review, proof-read and finalize the report
  • Deliver the report to client

Call your nearest NBVG Office to discuss your valuation needs, in complete confidence.