I have an MBA … so I’ll just do my own valuation

So this is a fun call that we get from time to time.  Bob the Business Owner lobs in a call or an email inquiring about getting their business valued.  But after learning that its not – and I know this is a huge surprise – free, Bob responds “Well, I have an MBA so I’ll just do it myself.”

You probably know where this is going, right?

Please Listen: Bob, I would really like you to reconsider what you are saying here.

Item 1: How Much Valuation Experience Do You Actually Have?

So you went to B-School and got your MBA.  Depending on your school and track you probably took some where between a few and a bunch of finance related courses.  How many where courses on valuation?  And how many on the nuances involved in valuing a small company?  For instance, here’s

Let’s look at Wharton’s Financial Services track.  Here’s their fixed core cirriculum:

MGEC 611: Microeconomic Foundations
MGEC 612: Advanced Topics in Managerial Economics
MGMT 610: Foundations of Teamwork and Leadership
MKTG 611: Marketing Management
OPIM 611: Managing the Productive Core of the Firm: Quality and Productivity
STAT 613: Regression Analysis for Business
WHCP 611: Management Communication-Speaking

Which one of those is jumping off the page as “that’s a super intensive course about valuation”?

Item 2: Is This the Best Use of Your Time?

Granted, Bob is a smart fellow.  He’s an entrepreneur.  He can DIY.  He can read some books, googles about the internet, and figures out some stuff about valuing a small business.   Once Bob’s got the swing of things, he can work on building out a viable financial model to suite his firm, and away we go.

The thing is, I know how long it takes us to value a business.  I presume Bob’s time has a reasonable hourly rate attached to it.  I also presume that to do it right, including the ramp up learning curve, this is probably (by that I mean totally) going to take Bob longer than us.

Is this the best use of your time?

Item 3: How Do You Know You Got It Right?

Because, it’s pretty important to get it right.  Are you planning for an exit?  Considering a sale?  Buying a company?  Regulatory requirements for 409(a)?  All of these are pretty big decisions with real life implications.  This might not be be the best time to go all DIY.




Dan is the Founder of Quantive and Value Scout. He has two decades of experience in leading M&A transactions. Additionally oversees Quantive's valuation practice and has performed thousands of business valuations.



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