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Strategic Growth Valuation
A Business valuation is a process of determining the value of a business enterprise or ownership interest (the percentage of shares or stocks). Many business buyers and sellers want to know “What is the value of the business that they are buying or selling?” And in many instances, is it often used as part of the negotiation process to determine the price they are willing to pay or receive to effect the sale of a business. However, value and price may not always be the same. For example, a small business may be valued at $250,000 but the seller and buyer may agree to a purchase price that may be lower or higher than the value (e.g. $230,000 or $260,000). Many shareholders, investors, partnerships, and stockholders not only want to know what the overall value of the business is worth, but what is the value of their shares, stocks, or ownership interests? In addition to the valuation of a business or business interest, a business valuation engagement is also necessary for a variety of other purposes such as:
Queen City Consulting specializes in Business Planning valuations, which we refer to as our Strategic Growth Valuation. Although our Strategic Growth Valuation is designed for Internal Management and Business Planning purposes only; it follows the same Development and Reporting Standards of the National Association of Certified Valuators and Analysts (NACVA) for the following two types of Valuation Services and values:
A Valuation Engagement considers all of the different methods under the Income, Market, and Asset Approaches for the Conclusion of Value, which is a detailed valuation engagement (https://www.nacva.com/standards).
Whereas, a Calculated Value is a limited scope valuation engagement that is agreed upon by the client and the business valuation firm. A Calculation Engagement generally does not include all of the valuation procedures required for a Valuation Engagement.
Our Strategic Growth Valuation is limited in scope and considers only the following Business Valuation Approaches and Methods:
These methods will be used for comparison purposes to corroborate the reasonableness of the calculated values among the two Approaches.
The Strategic Growth Valuation (Calculated Value) establishes an estimated baseline (range of values) on the company’s market value at the “Enterprise Level” and to measure the growth values over the years in relationship to the company’s Business Growth Strategy and implementation plans.
In other words, to evaluate, assess, and monitor the overall success and performance of the company’s Growth Strategy. “Has the Growth Strategy increased the Company’s Net worth or Value over the years, and if so, “By how much?” If not, “Why not?” This allows the business owners to reevaluate and redefine their Business Growth Strategy, and implementation plans, if necessary.
Our Strategic Growth Valuation (Calculated Value) Summary Report includes the following:
I. REPORT FUNDAMENTALS
1. Introduction and Sources of Information
II. QUALITATIVE FOUNDATIONS
2. Analysis of Subject Entity and Non-Financial Information
3. Economic Conditions
III. ANALYTICAL FOUNDATIONS
4. Information Analysis
5. Financial Statement Analysis—Entity/Company
6. Financial Statement Analysis—Industry Comparison
7. Financial Statement Analysis—Ratios
8. Financial Statement Analysis—Ratios—Normalizing Adjustments
IV. VALUATION APPROACHES AND METHODS CONSIDERED AND USED
Methods of Valuation—Market Approach
9. Direct Market Data Method —Transaction Databases
10. Industry Specific Multiples
Methods of Valuation—Income Approach
11. Income Approach
12. Capitalization of Earnings Method
13. Discounted Cash Flow Method
14. Weighted Average Cost of Capital (WACC, if applicable)
15. Build-Up Methods (Cost of Capital/Rates of Return)
V. REPRESENTATIONS OF THE VALUATION ANALYST
16. Attributes Present that apply to the Valuation Analyst
VII. CALCULATED VALUE (Range of Estimates)
17. Calculated Value
1. James R. Hitchner, Financial Valuation: Applications and Models, 4th edition, 2017, Wiley & Sons, Inc.