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What are you worth? How to value a company


03 Jun 2015

How do we value a company? We talk you through our process of valuation, with a back to basics guide that covers everything from the initial conversation to site visits and document-gathering.

How to Value a Company

Whether selling up or setting up key man insurance, ascertaining the true value of your business, with all the associated assets, is imperative. Getting a grip of the finances is one thing, but businesses in the medical and care sectors require a deeper understanding of how they operate before being able to give accurate valuations.

So what do chartered valuation surveyors look for when assessing the worth of a company in these sectors? Well, it’s an area Andrew Forbes valuers have combined experience of over 40 years, so allow us to offer up our insight, a step-by-step guide to how we value your business.

Visit for context

Our valuation process starts with a visit to the premises, and a conversation with the owner. At this stage we’re getting to know the business, building up our awareness of the context that surrounds the pure data. What are the occupancy/trading levels? Is a strong management structure in place? Are key staff members likely to stay on?

We’ll use what we learn from that conversation to better understand income streams, costs, and the individual peculiarities of the company - things that can’t be found in the numbers. 

Gather the documents

The next stage is to collate the actual data involved in valuing the company. We’ll need access to a lot of documents in order to calculate the likely future costs and profits, on which our valuation is based.

  • Leases on the premises
  • Practice agreements
  • Professional registrations
  • Status with regulatory bodies, e.g., CQC (Care), GPhC (Pharmacy), or GDC (Dental)
  • Three years’ accounts
  • Up to date management information
  • Staff details, including shift patterns and pay rates

Do the sums

We feed the collected data into a spreadsheet, which allows us to see how the costs of your business have changed over time; hence the request for three years’ accounts. We use the past to make predictions about the future, to calculate the Fair Maintainable Trade (FMT): the annual level of trade, income and expenditure the company can be expected to make in future.

Once we know how much profit the company’s made in the past, and can make an educated guess - based on the FMT and our knowledge of the industry - about how much it can make in the future, we can make the final calculations about its value.

Put simply, we work out the next year’s net profit for the company, based on the FMT. We multiply that by a market yield, which is based on other transactions when similar businesses are sold, and round the resulting figure off to a presentable asking price.

The figures are finally drawn up into a report document, which we send directly to the client. While it seems like a straightforward process, it’s anything but. Thanks to the wealth of experience within Andrew Forbes, however, we can carry out valuations quickly, efficiently and accurately.

Guide:

Back to basics on how to value a company - the process.

This will be useful to people wondering how much their business is worth and also display what Andrew Forbes do for businesses.

  • Visit the premise of the business
  • Discuss the business with the owners to understand
    • The business
    • Income streams
    • Costs
    • Individual peculiarities
  • Gather documents
    • Leases
    • Practice agreements
    • Professional registrations
      • CQC (Care)
      • GPhC (Pharmacy)
      • GDC (Dental)
    • Three years accounts
    • Up to date management information
    • Staff details
      • Shift patterns
      • Pay rates
  • Carry out a review of the business within an excel spreadsheet
  • Calculate the Fair Maintainable Trade of the business (FMT)
  • Calculate the net profit for the business using information above and knowledge of the relevant sector
  • Apply a market yield (multiplier), from similar transactional data
  • Write the report
  • Deliver to customer

Whether you’re looking to sell, move premises or investing in future developments, we’re always happy to help. Please contact us online or call 0117 968 8844 for more information on our valuation services.

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