Business valuation

Buying or creating a business is not an act of consumption but an act of investment. When investing their money in a certain business, investors always look for positive economic effect. Therefore, measuring this effect with highest possible accuracy is the first a foremost task for them.

Accounting indicators of profitability have long been considered to be universal measure of business effectiveness.  But presently it becomes more and more obvious that such indicators, though being appropriate for tactical goals, do not provide really reliable basis for strategic investment decision-making.

Every reasonable entrepreneur is interested in real and free-to-use flows of cash rather than in figures of profit disclosed in financial statements. However, such an entrepreneur cannot be automatically called an investor. He or she will become an investor only after starting to:

  • Compare an amount of invested capital with a return on it,

  • Analyze alternative investment options.

It is exactly a cash flow and an alternative cost of capital that determine a value of business, which is an integral indicator of its efficiency.

There are a lot of cases when circumstances or legal requirements force owners (or managers) to value their companies. And such cases are occasional for the most part. Successful investor, however, must always be aware of a real value of his or her investment and in control of it.

Investment is the game where undervalued assets are the main goal. In this game well-informed investor always can gain profit at the expense of a less informed one.

In the world of investment, information is a shield and sword. And our mission is to arm our clients with reliable valuation analytics that will enable them not only to know the value of their businesses but to create it as well.