VALUATIONS AND FINANCIAL MODELLING
A key part of Toro Liberty’s offering is our valuation and financial modelling. Whilst all companies prepare basic accounting and tax information, small and medium enterprises (SMEs) often have quite basic management accounting reports. This means that it is often difficult to understand several aspects of a business:
- Financial impact of focusing on different growth paths
- Working capital requirement for expansion
- Impact of a divestment or acquisition
- Cost drivers
- Customer profitability
- Consolidated view of accounts
In our experience, buyers and investors expect a sophisticated financial model to give them confidence in the accounts and projections of a business. A good model should provide confidence in:
- The amount of capital required
- The impact on the business of various risk scenarios
- Management’s understanding of the revenues and costs
By preparing financials early in a capital raise or business sale, management have time to benefit from the insights a good model provides. They also have time to ensure that the assumptions are valid, before an investor puts them on the spot.
Of course, the model is also the basis for business valuation. And it’s not just the figures that count. It’s the confidence that a buyer or investor has in those figures that determine how much they are willing to pay for future earnings. Trade buyers, and high net worth investors are presented with many opportunities to invest their money. If they cannot get a clear, concise and reliable understanding of the financial drivers of your business from the materials presented to them, they will either pass on an opportunity or discount their price.
So Toro Liberty strongly recommends making an investment in how your business’ financials are modelled and presented to investors. We can work with your internal finance team, senior management and external accountants to help capture a robust picture of the past, present and future financial outcomes.
For more information, please call or email a member of the team.