Before estimating the value of the company, it is necessary to gather information to assess the situation and prospects.

The documents and data to be collected are as follows:

• Annual accounts and results of the last 3 to 5 years (revenue, operating income, net income)
• Status of assets and debts (fixed assets, inventories, receivables, borrowings, payables)
• List and value of physical assets (premises, equipment, vehicles, machinery, computer equipment)
• Important contracts (commercial lease, contracts with major customers or suppliers, licenses, distribution contracts)
• Customer Portfolio (number of customers, turnover with the main customers, distribution and evolution of customers)
• Information on employees and the organization of the company (staffing, qualifications, division of duties, organization of responsibilities)
• Elements of intellectual property (markings, patents, licenses, software, trade name, sign, domain name)
• Data relating to market and competition (market size, evolution, main competitors, company positioning)
• Elements for assessing the company outlook (ongoing projects, backlog, development opportunities, planned investments)

The valorization of the company is based not only on material elements of the company (premises, materials, equipment, stocks, etc.) but also on the intangible elements of the company (trademarks, patents, licenses, know-how, etc.) which are also important in the decision-making of the buyer. The value of the company therefore depends on several factors that need to be analyzed before estimating it.

Among the main levers of valorization shall include:

• Economic Outcomes : analyse the evolution of the turnover and results over the last 3 to 5 years, profitability and financial situation. A profitable business and consistent performance can help to strengthen the value of the company.
• Means of production : examine the premises, equipment, equipment, stocks and tools necessary for the activity, taking into account their condition, level of use and the investments to be made. Aging equipment or equipment requiring significant investments can reduce the attractiveness of the company.
• Employees : examine the workforce, skills and qualifications, but also the distribution of responsibilities and the ability of employees to ensure business continuity. Strong dependence on a key person can be a point of vigilance for transmission.
• Know-how : identify the skills, methods, processes and knowledge specific to the company that contribute to its performance and can be passed on to the buyer. The formalization and transmission of this know-how can facilitate the resumption of activity.
• Market : analyzing market developments, company positioning and competition. The prospects for the sector, its level of competition and the possibilities for development make it possible to assess the prospects for the activity.
• Partners : review relationships with major suppliers, distributors, subcontractors and other partners. Strong dependence on a single partner or contractual relationships that are difficult to transfer can be a point of vigilance.
• Internal organization : to assess the functioning of the company, the division of responsibilities and its level of dependence on the leader. A structured and easily transferable organization can facilitate recovery.
• Communication : examine the company's reputation, image and visibility (brand identity, website, social networks, commercial media). These elements can contribute to the attractiveness of the company to customers and the buyer.

It exists several methods the enhancement of company. It is important to combine each of these methods to obtain a valuation as close as possible to reality.

Profitability Method

The profitability method, also known as the return method, consists in estimating the value of the company from its capacity to generate profits in the coming years. In particular, it may rely on theGross operating surplus (EBE) which measures the economic performance of the activity and makes it possible to assess its ability to generate resources. THEEBE: titleContent can thus be used, depending on the method chosen, to determine a level of profitability or a multiple making it possible to estimate the value of the company.

Example :

A company has a mean EBE of €50,000 on the last exercises. If a multiple of 5 is used for the evaluation, its value can be estimated at €250,000 (€50,000 × 5).

This estimate should take into account the risk that the expected benefits will not be realized. Forecasts are usually made over a limited period of time to reduce uncertainties related to future business developments.

This method is particularly useful for companies whose value is based primarily on their ability to generate profits. However, it should be used with caution when results are erratic or the outlook for activity is uncertain.

Please note

Several methods can be combined to obtain a more representative estimate of the value of the company. The result obtained constitutes a estimation at a given time and not a definitive selling price.

For more information on valuing a company, the DGFIP: titleContent make available a guide on the evaluation of companies and business titles :

Evaluation of companies and business titles

French public finances general directorate (DGFiP)

Pour en savoir plus

The valuation of the company can be carried out with the help of an accountant or any other professional specializing in the transmission of companies:

For contact an accountant :

Who shall I contact

Pivot Local What is your city or postal code ? Example: Sainte-Cécile-les-Vignes or 95200

• Order of Chartered Accountants

The recovery carried out previously makes it possible to estimate its value, but does not automatically determine its transfer price. The estimated value constitutes a basis for negotiation from which the transfer price may be fixed.

In determining the transfer price, account shall be taken of:

• the estimated value of the company and the results obtained with the various recovery methods
• the market conditions and prices for comparable companies
• the prospects for development and the investments that the buyer may have to make
• the conditions of the transfer (payment methods, debt recovery, guarantees, support for the buyer)
• the elements likely to vary the price during the negotiation with the buyer

The sale price thus results from all the characteristics of the transaction and from the agreement concluded between the transferor and the purchaser. It can therefore be above or below the estimated value.