We were engaged as Business Valuers to assess the future market worth of a bed manufacturer. It was a family business that had a mutual agreement to purchase and wanted a valuation to determine the price in which one party would purchase the business from the other. Our instructions were to value the business as a whole not the shares in the business.
The main hurdle we discovered when assessing this business was the varying income and profit levels over recent years, which made it very difficult to assess trends and in comparing with other similar businesses. Whilst the adjustment of the financials did help establish some trends and key performance indicators it still was not as ‘smooth’ as one would like.
As per usual a number of different valuation methodologies were considered and tested. However, it was decided that given the business had a very long history we could go further back into the financials and analyse the peaks and troughs. This did help establish High, Low, Median and Mean levels of income, expenses and profit. This assist in establishing what we called a maintainable PEBITDA in which we could then apply and appropriate multiple or capitalisation rate to assess market worth.
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