Sourcing Data for Business Valuation

Gathering accurate relevant data is arguably more important than ever in order to complete a comprehensive, consistent, and thorough business valuation. For business valuation, one needs to look at overall current value and the future growth prospects specifically for which extensive quantitative & qualitative analysis from several sources is required.

Using the Coresignal self-service tool can ensure the valuation process is grounded in reality and reflective of the true market conditions and business performance.

The business valuation process

Business valuation entails a comprehensive analysis of a company’s financial statement, adjustments for non-recurring items, and appropriate valuation methods ranging from the use of income, and market price, to asset-based valuation methods.

It’s more than just financial metrics and includes intangible assets like intellectual property (IP), brand value, industry trends, and market conditions. Thus a realistic and actionable valuation can be achieved by blending in-depth financial analysis with exhaustive evaluation of intangible assets along market dynamics.

There are also several approaches that investors may take for business valuation, including cash value analysis, revenue multiplier, book value of the business, earnings multiplier, and others. Investors should also educate themselves on the market, in which the company operates, and identify the industry trends to make an informed decision.

Some issues may arise during business valuation — the needed data is often of poor quality, sourced from multiple places that need integration for consistency purposes, and sometimes even if third-party (such as legal reporting) access could be expensive or difficult. That’s why some investors choose services of self-service data providers like Coresignal to avoid these issues and gain access to structured data.

The types of data to use for valuation

Here are the main data types investors and entrepreneurs can use to accurately evaluate all of the company’s assets and see the economic value.

Internal Data Sources

Strong business valuation is based on internal data, which helps in providing a direct perspective regarding the financial structure of the company along with its operational efficiency and customer category. At a higher level, internal data include:

• Financial statements: These may be the most important documents in a valuation. Balance sheets, income statements and cash flow statements provide different perspectives on your business’ financial performance throughout the years.
• Sales records: It also enables organizations to understand revenue streams, trends of sales and buying patterns on customers. Exposure to seasonal variability and the efficiency of sales strategy are also represented in them.
• Customer databases: You can learn how large your customer base is (based on demographics), purchase history, and loyalty program information that will help you understand the value of different types of customers.

External Data Sources

While internal data provides a detailed view of a company’s internal workings, external data places the business within the broader market context. Key external data sources include:

• Market research reports: These reports identify market trends, industry growth, and consumer behavior. They are useful for understanding the business landscape outside and inside of a company, market demand and competition.
• Competitor analysis: Analyzing competitors provides valuable information about their strategies, strengths, and weaknesses. Publicly available financial data from competitors can be used to benchmark and evaluate the relative performance of the business.
• Regulatory and economic data: Data on regulatory changes, economic indicators, and industry-specific regulations is crucial for understanding the external factors that can impact the business. This includes tax laws, trade policies, and economic forecasts.

Conclusion

Sourcing data for a business valuation is diverse and entails the collection, integration, and analysis of internal as well as external datasets. With the right approach, businesses and investors can now leverage full-scale data insights to reach an objective cost-effective valuation that is necessary for making strategic decisions based on real numbers in addition to attracting potential financial opportunities.