Insights

Every founder knows their business is more than a number. It is the culmination of years of hard work, sleepless nights, and tireless effort. This is why when you approach a business valuation, it can feel more like a final grade on your life's work than a simple financial exercise. A valuation provides clarity, validates your dedication, and empowers you to make smarter decisions about the future.

This is where an accurate business valuation becomes a strategic tool. At Evoke Management, we believe understanding your company’s true value is the first step toward securing your legacy. It’s an insight that empowers you to grow your business, secure funding, or plan for your next chapter with confidence.

Why a business valuation is more than an end number

A business valuation is a formal process that determines the economic value of your business. The result is a single, objective number. While that number is important, we have seen that the true value of the process lies in the analysis and insights it provides.

An accurate valuation goes beyond your balance sheet. It looks at every aspect of your business, including its market position, operational efficiencies, customer relationships, and the strength of your brand. It turns your financial history into a compelling story about your company's future potential.

What drives an accurate business valuation?

What really drives an accurate business valuation? From our perspective, it is a combination of factors, some within your control and some not. A great valuation is built by digging into all of them.

• Financial Performance: This is the most obvious driver. Your company’s revenue, profitability (EBITDA), and cash flow are the foundation of any valuation. An investor will look for consistent, predictable earnings and a healthy growth rate. This is where a fractional CFO can help you drive tangible growth and make your financials more appealing to investors.
• Market and Industry Trends: Your valuation is also affected by the market you operate in. Is your industry growing or shrinking? What are the key trends, and how is your business positioned to capitalize on them? A business that operates in a fast-growing sector is often valued higher than one in a stagnant or declining market.
• Business Strengths and Differentiators: What makes your business stand out from the competition? A strong brand, loyal customer base, and diversified revenue streams will all increase your valuation. Your intangible assets, things like intellectual property (IP), proprietary technology, or a talented leadership team, are often a major driver of value.
• Operational Efficiency and Systems: Is your business a well-oiled machine, or does it depend on you being there every day? A business that runs on clear systems and processes is far more valuable than one with a hands-on founder. The easier it is for a new owner to take over, the more valuable the business.
• Future Growth Potential: An investor is buying your company’s future, not its past. Your valuation will be driven by your ability to show a compelling vision for future growth. A clear growth strategy and a robust financial forecast can significantly increase your company’s worth.

If you are ready to understand the true drivers of your company’s value, we can help you uncover them. Schedule 30 min consultation with our business valuation specialist today!

What are the different types of valuation?

There are several methods used to value a business. The most common methods are:

• The Asset Approach: We often use this as a starting point to determine the minimum value of a business. It looks at the value of a company's assets both tangible (equipment and property) and intangible (goodwill and IP) and subtracts its liabilities. This method is often used for businesses with significant physical assets.
• The Market Approach: This method compares your business to similar businesses that have recently been sold. It’s a way to see what the market is willing to pay. This method relies on finding good comparable sales, which, from our experience, can be the most challenging part of this approach.
• The Income Approach: This is the most widely used method for valuing a profitable, growing business. It estimates the value of a business based on the income it is expected to generate in the future. This is done by projecting future earnings and then discounting them back to their present value. This method can also be used to show potential investors what they can expect from their investment.

How does an accurate valuation affect your strategy?

Your business valuation is more than an end number. It's a powerful tool that should guide your business strategy.

• It Guides Your Exit Plan: If your business valuation is lower than you expected, you have a clear roadmap of what you need to fix. If it’s higher, you can confidently accelerate your exit plan.
• It Helps You Raise Capital: When you are looking for investment, an accurate valuation gives you a strong negotiating position. It allows you to prove your business’s value and secure a better deal.
• It Helps You Attract Talent: A valuation can be used as a foundation for a compelling employee equity plan. When you know what your business is worth, you can confidently share its value with your team and incentivise their loyalty.

What is the biggest misconception about business valuation?

We have sat with hundreds of founders over the years, and we have heard it all when it comes to business valuation. The biggest misconception is that valuation is based on how hard you have worked. It's not. It's based on how much you have built.

Many business owners believe that their blood, sweat, and tears are directly reflected in the final number. While this dedication is what built the business, an accurate business valuation is based on objective, data-driven factors. It is based on the systems, the people, the revenue, and the processes that can operate with or without you.

This is why it is so important to work with a team that gets in the trenches with you and understands how to turn your hard work into something tangible, valuable, and attractive to a future buyer.

Your hard work has built something incredible. Now, let’s make sure its full value is seen. Contact us to begin the conversation about your business's future.