When you start a valuation, the first thing we ask for is three years of financial statements. Owners often ask why one year is not enough. The short answer is that a single year can mislead.
A business might have landed one large contract, lost a key staff member, or paid for new equipment all at once. Looking across three years lets the valuer see what a normal year looks like for your business.
What we look for in each year
Revenue, and whether it is rising, steady or falling. Gross margin, and whether it holds as revenue changes. Wages, including what the owners pay themselves. Any costs that will not repeat.
Where owners pay themselves more or less than a manager would cost, we adjust to a market salary and say so.
An unusual year is not a problem. It only needs to be explained, and the valuation report explains it.
If a year was unusual
Tell us early. We will ask a few questions about what happened, adjust the figures where it is appropriate, and set out each adjustment in the report so a reader can see what was changed and why.