Business Valuation

[Tom Ace]

When valuing a company in any industry, buyers must consider both financial and nonfinancial factors. Recognizing leading indicators is key, and being able to identify the stage of the given cycle is imperative when approaching individual companies. The buyer must closely examine the income statement and the balance sheet for early signs of trouble or improvement.

Other key factors that influence a company’s future prospects should be considered, such as management expertise and experience. Looking back at management’s past success or failure in the product life cycle stages can be a good indicator of future performance. In addition, a buyer needs to examine and be aware of macro-environment themes and how these affect the given company. Relative peer analysis is also vital in recognizing proper valuation of the individual company, and such analysis can yield insight into the scope of the company’s distribution channels and strength of customer relationships for current and future contract wins.

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