ExitVision Valuator

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Company Valuator

Answer all questions to the best of your knowledge. You can point your cursor over the question for more details. After you’ve made your selection, a short summary of that selection will appear. If that summary does not match your business, make a different selection.

What are Revenues over the last twelve months? what’s this?Size of revenues helps define the size, strength, clout, resilience of your business. A large revenue base also signals that your business has a lower risk of outright failure from occasional negative market shocks. While there are lots of buyers of small businesses active in the market, deep-pocketed institutional and strategic buyers will typically pay a premium for larger businesses, and will frequently ignore smaller businesses. 1

Businesses >$100 million in revenues are typically at national or international scale for their industry. To be sustainable your business will need to be focused on strategic direction as well as tactical excellence. Potential buyers will pay top dollar for attractive businesses of this size, provided that the business shows staying power and the ability to support transaction financing.

Businesses with $50-100 million in revenues are typically at or achieving national or international scale for their industry. To be sustainable your business will need to be focused on strategic direction as well as tactical excellence. Potential buyers will pay top dollar for attractive businesses of this size, provided that the company shows staying power and the ability to support transaction financing.

Businesses with $25-50 million in revenues are typically at regional or national scale for their industry, frequently with an international component. To be sustainable your business will need to be focused on strategic direction as well as tactical excellence. Potential buyers will pay top dollar for attractive businesses of this size, provided that the company shows staying power and the ability to support transaction financing.

Businesses with $10-25 million in revenues are typically at regional scale for their industry, and occasionally have national aspirations or an international flavor to their business. Potential buyers will be focused on the profesionalism of management and the opportunity for growth

Businesses with $5-10 million in revenues are typically regional players in their industry with robust product sets but lacking in the process and professionalism required for the next round of growth. Potential buyers will be focused on the profesionalism of management and the opportunity for growth.

While it's no small feat to operate a successful business at any level, your expectations should be set that businesses of your relatively small size are typically overlooked by the majority of larger buyers, and so your valuation will be impacted by absence of large checkbooks at the table. You'll likely be working with individual buyers or relatively unsophisticated parties in any sale process.
What are Gross Margins over the last twelve months? what’s this?Gross margins (Revenues minus Cost of Goods Sold) are a basic measure of the profitability of your business. High gross margins indicate that a business has strong pricing power in its market and suggest additional resiliency of the business to a potential buyer. 2

Sustained gross margins of >80% are rare and impressive. You'll want to do everything you can to take advantage of those margins while preparing yourself for the inevitable margin erosion as competitors figure out what you're up to. Lower margin strategic buyers will be lining up to bolt you on to their operations to drive margin improvements, while financial buyers will be excited to own such a profitable business. Congratulations!

Gross margins of 50-80% are fantastic and highly sought after by buyers. However unless you've found the perfect little niche that your competition can't touch, you'll be facing margin erosion pretty quickly. Take advantage of your high margins by growing your business as fast as you can and/or monetizing what you've got with a buyer excited about the margins your business is delivering.

Gross margins of 25-50% are great if they're sustainable and overhead costs can be kept under control. These margins are respectable for well-managed services and manufacturing businesses, and superb for commodity distribution businesses.

Gross margins of 10-25% are perfectly respectable for many commoditized manufacturing and distribution businesses, but do not suggest outperformance and may in some instances indicate under-performance. You'll want to review your product lines to see if it makes sense to re-price your product/service set and/or refocus your product mix around higher margin items.

Gross margins of <10% are reserved for only the most commoditized of high volume distribution businesses. Otherwise, it's hard to imagine your firm staying in business for much longer.
What are Cash Flows ("EBITDA") over the last twelve months? what’s this?Cash Flow is a critical but often misunderstood number in defining your business valuation. Buyers often substitute "Earnings before Interest, Taxes, Depreciation and Amortization" ("EBITDA") as a short-hand for "Cash Flow", so we'll use that here. Compute EBITDA by considering all the money earned by your business before paying off interest on loans and taxes (a.k.a. "operating income"). Then add to that non-cash expenses like annual depreciation of equipment or amortization of intangible assets. If personal expenses (the nanny, the boat, etc.) are booked through the business, add back those costs as well. 3

EBITDA of >$50 million mean that your business is a serious player and can pretty well write its own ticket. You'll have serious interest from all of the biggest players in the market who will likely pay a handsome premium for access to the cash streams that your business is generating.

EBITDA of $25-50 million is terrific. Your business is capable of great things, and you'll have significant interest from most of the major players in your market.

EBITDA of $10-$25 million shows that your business is solid and highly valuable. Your business will have great interest from strategic investors and large investors across the board.

EBITDA of $5-$10 million shows that your business is solid and highly valuable. Your business will have great interest from strategic investors and smaller institutional investors across the board.

EBITDA of $1-$5 million shows that your business is capable of delivering strong, if moderate results. While your business will be of interest to a strategic and institutional investors, it will be a smaller pool of investors and as such the premium paid for your business will be less robust.

EBITDA of <$1 million may be fantastic for a small revenue business, but in the grand scheme it's at the smaller end of the scale. Your business will be attractive primarily to smaller strategic buyers, the smallest of institutional investors and perhaps wealthy individuals, all at relatively subdued valuations.
What is current Book Value of your company? what’s this?Book Value (aka "Net Assets", "Net Worth", "Shareholder's Equity") is an indicator of the value built up in the business over time. It has less relevance to buyers then operating statistics like revenue or cash flow, but is a critical back-stop to your company valuation when the business is suffering from short- or medium-term setbacks. Book Value = Total Assets minus Total Liabilities. 4

Book Value is driven by the the difference between your assets (what you own or what others owe you) and liabilities (what you owe to others). Because most potential buyers are focused on the cash flows generated by your business as a going concern, their primary interest in Book Value as a valuation metric will be to understand how much value has been built up and re-invested in the business over time.

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