We think its more of an art than a science. And this is borne out by legal precedent:
"in the field of valuation the experience of the valuer and his ability to form a sound commercial judgement is of overiding importance. The process of valuation cannot be reduced to the application of a set of abstract formulae..."
Justice Vinelott - High Court Case Re Cumana (1986)
I lead our business valuations activity, and as such I often get to see earlier attempts at valuing the company, or sometimes in a dispute the valuation prepared for the other side. I'm always astonished at home little knowledge is shown of the business being valued. Its like a surveyor valuing a house simply by driving past it at speed. And companies are more complex to value. I've also seen valuations where earnings multiples are simply plucked from the air, or derived from quite ludicrous comparatives. And probably the worse offenders are the valuations that clearly suffer from "death by spreadsheet". In other words lots of complicated, but meaningless, analysis.
We believe strongly that valuation reports should be useful, and if possible interesting to the company that commissions them.
If you're interested in learning a little about the factors that will influence the value of your business, why not come to one of our seminars where we cover the topic. We're runing one in Norwich this week 14 March at Dunston Hall Hotel. We're running them again in Cambridge at the Trinity Centre on 13 June, and in Borehamwood at the Holiday Inn on 20 June. If you'd like to find out more about the program or to book visit our events page.