In this article, we discuss issues relating to perception vs. reality, the role related issues play in determining agency value, and how both buyers and sellers deal with them. The table below depicts typical valuation packages for two agencies, using several profile items. We've seen some sellers insist on a multiple of revenue as the true measure of value. Once the valuation is completed, one always can go back and compute the multiple as a reflection of the valuation. But we would never recommend using a multiple as the first indicator of agency value, since there is no way to anticipate what factors may influence the multiple.
Hard numbers expressing tangible assets tell only part of the story.
Soft numbers resulting from recognition of intangible assets also reveal important information concerning potential value. In most agencies, there are a number of functions that may reveal the existence of intangible assets that need to be evaluated, especially since they're often perceived differently by the seller and the buyer. Selected primary intangible assets are discussed below. All of the questions related to each one need to be answered and evaluated for both seller and buyer so their perceptions are in alignment. The seller strives to ensure that the buyer's perceptions are positive and focused on how the seller's assets add value.