Where it starts
Start with what you want from ownership.
More income, room to grow, less dependence on you and a future sale can call for different choices. We establish the objective before judging the options.
How it is measured
Earnings are one part of the picture.
Pricing, sales mix, delivery cost and capacity affect the profit the business can produce. We examine whether those earnings are repeatable and what investment and working capital are needed to sustain them.
What moves it
The quality and durability of the business also matter.
Customer concentration, management depth, contracts, operating reliability and the quality of information can affect how a buyer views the earnings. Their importance varies by business and transaction.
Reading the range
Use a range with a stated basis.
An earnings multiple can be a useful way to explore value for some established businesses. It is an indication, not a universal valuation method or an offer from a buyer.
Where we develop a working range, we state the earnings basis, the source of the multiple assumptions and the limitations. We distinguish changes that improve earnings from those that may reduce risk. We do not assume their value effects can simply be added together.
Enterprise value is also different from what an owner receives from a sale. Debt, cash, transaction terms, costs and tax can affect the eventual proceeds.
Clearer priorities. Stronger execution. Better performance.
A Commercial Assessment gives you the read on where value is being created, where it is being held back, and what closing each gap could be worth.
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