Sounds like a great offer right? “We’ll value your business for free.” But as in free apps for your devices, if it’s free… you are the product. Or your business in this case. In order to offer any semblance of a valuation of your business, an analyst would have to have intimate details about your business: revenue, profit, cost structure, products and customers. We’ll take a look at how these guys operate, what they may get out of running your numbers for free and why you might still want to do something like a valuation with a trusted advisor.
The free valuation offer has been used by a variety of businesses. They all are predicated on the principle that truly reliable information about your business is a valuable commodity. It is intelligence that would be valuable to any number of parties. Individuals behind the offer might be sizing up your business for a potential offer to buy in which case having the numbers before you have a chance to prepare your business for sale might be a weakened negotiating position for the owner. Or perhaps, a competitor is funding the research in order to gauge the strength of other players in its market. Since there is no value in the information itself, the firm offering the “free” service must be anticipating future value to themselves. Either through services they plan to sell the business owner or through third parties who’s interests may or may not be aligned with the owner or the business.
Why Get Valuated?
So why bother with a valuation at all. That is if you’re not forced to do one by a bank or commitments to shareholders? We believe there is value in understanding the value of a business as sort of a net, net, net view of how the business is doing. Apples to apples year-over-year. By trending the value of the business, the owner and leadership can understand, net of pandemic impacts or whatever wild and crazy thing the world throws at the business, how it actually did. It’s a solid way of taking off the emotional goggles we all wear to peer at the business in the cold light of day. And that’s important to do at least once a year. We recommend it as part of a Rapid Business Assessment that also looks at the operational and commercial reasons behind the numbers. This assessment, as a lead into strategic planning at the end of the fiscal year, is an excellence way to take stock prior to planning business for next year.
“So it’s a cost item, not a profit item?”, I hear you asking. As part of a Rapid Business Assessment, the valuation can help point the way to greater earnings through building revenue and reducing costs. For example by growing earnings by improving the mix of products and services to favor the more profitable and lean away from the less or unprofitable.
Call To Action
Feel free to ignore offers for free valuations. They are worth every penny you pay for it. And if you would like a Rapid Business Assessment as input into your next strategic planning cycle, we can help.
I hope you found something to apply to your business in this MBR. Let me know either way.
See us here on LinkedIn.