**Introduction**

Understanding the true value of your business is a critical factor in attracting investors and securing loans. Whether you're a startup looking for initial funding or an established business seeking expansion capital, an accurate and well-documented business valuation can be the key to unlocking financial opportunities.
At Mikel Consulting, we specialize in providing comprehensive valuations that not only reflect the current market conditions but also position your business favorably for potential investors and lenders. Let’s dive in.

Why Business Valuation Matters

Beyond a simple dollar value, an in-depth business valuation provides a quantitative measure of your company's worth, which is crucial for several reasons:

Investor Confidence: Investors need to understand the potential return on their investment (ROI). A well-documented valuation not only offers transparency and reassures investors that your business is a viable opportunity, but also gives them confidence that you understand the quantifiable value you deliver to the market.
Loan Approval: Banks and financial institutions require a clear understanding of your business's financial standing before extending credit. A detailed valuation serves as a foundation for loan applications—demonstrating that your business is capable of repaying the loan—and makes it clear how (and when) you can pay.
Strategic Planning: Beyond immediate funding needs, knowing your business's value is essential for long-term strategic planning. Whether you're considering a merger, acquisition, or future sale, a current valuation helps you make more informed, insightful, and ultimately value-creating business decisions.

Methods of Business Valuation

There are several industry-standard methods to determine a business’ value , each with its advantages and considerations:

A market valuation method compares your business to similar businesses that have been sold recently—a common practice in public and private equities and some VC contexts. It's particularly useful if your business operates a relatively comparable model within a well-defined market with many comparable transactions (e.g., real estate, etc.).
The income approach focuses on the future earning potential of your business, discounting future cash flows to present value. It’s a preferred method for businesses with steady and predictable income streams, and is often used (in various forms) when there is insufficient data or a lack of competitors for the market value approach.
A more detailed version of the income approach, DCF projects the future cash flows of the business and discounts them to present value using a discount rate—most typically, the weighted average cost of capital (WACC). This method is ideal for businesses with long-term growth potential, and is the standard method offered by Mikel Consulting.
This method involves comparing your business to publicly traded companies in the same industry. It’s a common approach for businesses looking to go public via IPO or attract significant investment. While less common in early-stage companies, the growing availability of data enables the CCA method to be applied in new contexts for earlier startups.
By taking a fixed multiple relating to a specific factor (e.g., revenue, EBITDA, etc.) in established companies or industry benchmarks and multiplying it by your company's forecast value, a multiple-based method valuation offers a quick and easy way to compare. Multiples vary by business type and industry, and many VCs use specific multiple variants.
An asset-based approach to valuation calculates the value of your business based on the sum of its assets, minus liabilities. It’s often used for businesses with significant tangible assets (e.g., manufacturing companies) or for liquidation scenarios. It is less common in new ventures due to the lower presence of fixed assets, but still viable in some cases.

Business Valuation Assumptions

At Mikel Consulting, we focus on developing and understanding effective valuation risk—from in-depth market research to effective WACC weighting—and other assumptions to ensure a thorough understanding of both your business and the broader market environment. We correspondingly tailor each valuation to your unique business model and needs—from analyzing historical financial data to researching industry trends and market conditions—to identify how potential risks impact your business valuation. From here, we consider valuation from an investor or lender’s perspective, assigning appropriate weightings to risks—based on likelihood and severity—ensuring that assumptions reflect realistic, data-driven scenarios. Furthermore, we incorporate sensitivity analysis to test the impact of various assumptions on revenue and valuation outcomes. Our expert team, in collaboration with industry experts and leveraging reliable financial models, further enhances the accuracy and robustness of these valuation assumptions, ultimately leading to more informed and confident decision-making.

“I have always found it easier to evaluate weights dictated by fundamentals than votes dictated by psychology.”

— Warren Buffett

Through this focus on grounded assumptions, risks, and weighting—rather than the ever-slippery slope of psychology and inevitable “hockey stick” growth that often results—Mikel Consulting ensures a simple, robust, and fundamentals-driven valuation for clients.

How a Valuation Improves Your Business

The impact of a business valuation on the funding opportunities available to your business can be seen in several areas:

Negotiation Power: A comprehensive valuation gives you a stronger position in negotiations with investors or lenders. It allows you to justify your asking price or loan amount based on solid data rather than speculation. At Mikel Consulting, we use your information, our expert team, and industry-standard data to strengthen valuations.
Risk Assessment: Investors and lenders use business valuations to assess the risk associated with their investment or loan. A higher valuation indicates a lower risk, making it easier to secure favorable terms. Risk varies significantly between businesses, and we strive to ensure each model accurately reflects underlying risk factors.
Attracting the Right Investors: A clear and compelling valuation can attract investors who align with your business's goals and vision. It helps you avoid wasting time with investors who might undervalue your business—factors we believe are essential to securing the right funding (and funders) for your business venture.
Loan Terms: Lenders may offer better terms, such as lower interest rates or longer repayment periods, if your business valuation shows strong financial health and growth potential. Similarly, investors are more likely to offer favorable agreements for more accurately valued, growth-oriented businesses.

The Mikel Consulting Advantage

At Mikel Consulting, we understand that every business is unique, which is why we tailor our valuation services to meet the specific needs of your company. Our team of experts utilizes a combination of these methods, ensuring a comprehensive and accurate assessment of your business's value. We also provide detailed reports that are easy to understand, making them an invaluable tool for discussions with potential investors or lenders. We believe that a well-executed business valuation is not just a number—it's a strategic asset that enhances your ability to attract investors and secure loans.

At Mikel Consulting, we’re dedicated to helping you unlock the full potential of your business through accurate, data-driven valuations. Contact us today to learn how our valuation services can support your growth and funding strategies.