Many entrepreneurs want to know the value of their company but need help finding a reliable method

Hampus suggests that a fundamental method to gain insight into a company's value is through a thorough financial analysis, which involves studying the underlying profitability of the business. In addition, a company valuation should include all standard valuation methods, such as discounted cash flow (DCF) analysis, leveraged buyout (LBO) valuation, sector-specific transaction multiples, and size-specific transaction multiples.

When is it most important to be aware of your company's value?

Hampus continues by stating that there are various situations where a company valuation is necessary. For example, if you are considering selling your company, it is essential to objectively assess its value before meeting with investors. This provides a better understanding of a reasonable price to expect during a sale. A potential buyer also wants to see a realistic valuation of the company to make an informed decision. The same applies when facing a capital raise, where a valuation can help determine a fair purchase price and prevent any party from being unfairly disadvantaged.

Hampus also emphasizes the importance of a professionally conducted valuation during special events such as share regulation between shareholders, division of assets during divorce proceedings, or estate settlements. In addition, many shareholder agreements also require the involvement of an independent valuation expert.

What are the most common mistakes made during a company valuation?

The most common mistake is relying on one's auditor or purchasing a generic valuation that provides a theoretical value from individuals who are not active in the market. Therefore, engaging a valuation professional who works in the transaction market, buying and selling companies, is essential. A correct valuation also requires access to reliable and accurate financial and actual market data, Hampus highlights. The data should be diligently collected and include transaction multiples, market trends, expected market growth, and return requirements per market/buyer type, among others, to obtain an accurate market valuation.

It doesn't have to be costly. Hampus concludes by stating that a company valuation doesn't have to be an expensive and extensive process, making it possible for more companies to take control of their situation.

Advice from Hampus:

- Obtain a reliable market valuation of your company. Several serial acquirers have built a business model on the fact that entrepreneurs often don't know their value, allowing them to "bargain" for companies.

- Valuation is a dynamic process, so regularly assess your company's value. We live in a changing world, and financial and market data shift and can be influenced by external factors.

- Ensure access to accurate data and understand your industry and market to avoid misleading valuations.

- Engage a valuation expert to assess your company’s value objectively and reasonably.

About Leonh:

Leonh's valuation tool is based on the most recognized valuation methods and has Sweden's largest database of unlisted industry multiples and size multiples, enabling high-quality and accurate valuations. The process is time- and cost-effective and can value companies in all market-relevant ways based on future cash flows (DCF and LBO) and comparisons with previous transactions within the industry in which you operate. www.leonh.se

Leonh subscription - For companies that want free access to the valuation tool for ongoing valuations of their own or other companies. It includes ongoing support and access to training/seminars on company valuation.

One-time valuation - EVOLVEFY's valuation experts and advisors are Leonh-certified and perform valuations for those who want to determine their company's value at a specific time. Prices start from 15,000 SEK per valuation.

Om Evolvefy

‍