To make the valuation exercise easier and more approachable, wecalled QuickValue. It’s based on Reed’s experience working directly with hundreds of middle-market leaders, helping them better understand what their companies are worth, and why. To perform this kind of self-guided valuation, your internal team doesn’t need future financial projections — most of what you need is at hand, and what you don’t have can be obtained easily.
First, you’ll identify the most important value drivers to your business — we suggest picking eight to 12 — and then rate each on a score of zero to 10, with 10 being best to create your Value Driver Score. This score forms an important element in of your valuation, because it quantifies the qualitative aspects of your business which most other valuation methods ignore. Then, you and your team use market-rate multiples of public companies to assess the value of businesses similar to yours.
Consider the following hypothetical example. Company X is approached by a competitor with an acquisition offer. The price, the competitor says, will be based on a widely used industry multiple of 12x EBITDA. The two companies are in a fast-growing industry, and both are performing well. Then, they rated themselves on each driver using a zero-to-10 scale with extra emphasis placed on drivers they deemed especially important. It was a spirited, frank, and revealing conversation. They took care to judge themselves thoroughly, including both the drivers where they excelled and the inevitable ones where they needed to improve. They tallied these ratings up to arrive at their overall score of 112 out of a possible 140 points.