The Difference:
Why Affordable Business Valuations?
Many business owners struggle to grasp the financial intricacies of their operations. Our assessments can illuminate key areas for improvement, ensuring you have the insights needed to drive your business forward.
Key Performance Indicators (KPIs)
Explore the 13 KPIs used to evaluate your business’s financial health and value. These metrics help identify strengths, risks, and growth opportunities.
Return on Equity (ROE)
What: Profit earned per dollar of shareholder equity.
Why: A key measure of business profitability and performance.
Receivables (Conversion)
What: Average days to collect customer payments.
Why: Faster collection means better cash flow and less risk.
Inventory Turnover
What: Times inventory is sold/replaced yearly.
Why: High turnover suggests efficient sales and stock use.
Fixed Assets Turnover
What: Revenue generated per dollar of equipment/assets.
Why: Shows how effectively you're using capital investments.
Debt-to-Equity
What: Ratio of total debt to shareholder equity.
Why: High ratios signal financial risk; low ratios mean stability.
Interest Coverage
What: Ability to pay interest using operating earnings.
Why: Higher ratios suggest better financial strength.
Cash-to-Debt
What: Compares cash reserves to total debt.
Why: High ratios indicate stronger short-term financial security.
Income-to-Revenue
What: Percentage of revenue converted into pretax profit.
Why: Reflects operating efficiency and pricing strength.
Cash Flow-to-Revenue
What: Share of revenue turned into usable cash flow.
Why: Strong cash flow supports growth without outside funding.
Receivables-to-Income
What: Compares customer credit to pretax income.
Why: High ratios may flag collection risks or cash flow pressure.
Inventory-to-Income
What: Ratio of inventory value to profit.
Why: Helps identify overstock or inefficient inventory practices.
Fixed Assets-to-Income
What: Compares fixed assets to pretax income.
Why: Helps measure efficiency of capital investments.
Total Debt-to-Income
What: Total company debt vs. pretax income.
Why: Lower ratios suggest manageable debt and stronger valuation.
Not all business valuations are created equally
Many people think the way to establish a valuation is to simply calculate EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
and multiply by “some multiple.”
This “some multiple” usually comes from what the owner heard from others in the industry or through an online search. However, this method often leads to inaccurate and misleading results.
At Affordable Business Valuations, we take
a comprehensive and tailored approach to ensure accuracy and relevance:
Industry-Specific Valuation
Our valuations take into account your business’s Standard Industrial Classification (SIC) code. This means there's no guessing as to the multiple, as your business will be compared to others in your specific industry. This method provides a more accurate and industry-relevant valuation.
Owner Involvement
We factor in how involved the owner is in the business. If the owner “wears all the hats,” the business is worth less than one that can function independently. We can run valuations both ways (with minimal or maximum owner involvement) to show the difference in value, giving you a clear picture of how your role impacts the business’s worth.
Comparative Financial Analysis
Our valuations also compare your financials with industry peers using a “green, yellow, red” light system. This visual and straightforward approach helps you understand where your business stands in comparison to others. Additionally, we provide value-driver recommendations so you know which areas to focus on to raise your valuation.
Expert Consultation
We believe that valuations aren’t just numbers on a page; they tell the story of your business. That’s why we include a consultation with the financial expert who prepared your valuation. This ensures you understand the numbers and have the opportunity to ask questions, making the valuation process more meaningful and actionable.
The ABV Difference
- Accurate Industry Comparisons: Utilizing SIC codes for precise, industry-specific valuations and assessments.
- Owner Impact Analysis: Assessing how owner involvement affects business value.
- Actionable Insights: Providing comparative financial analysis and value-driver recommendations
- Expert Guidance: Offering consultations with financial experts to ensure clarity and understanding.
Experience the ABV difference and unlock the true worth of your business with our expert, affordable valuation services
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