Pretty weak questions to gauge a value.
The biggest thing that makes a company valuable is how easily someone else can take it over. The more dependent a company is on the owner, the less valuable it is, the more the company operates without the owner, the more valuable it is. Yet this isn’t taken into consideration.
Anyone who has gone through the process of going from single-man shop to muti-inspector struggles with agents and clients accepting the new inspectors and agents/clients only wanting the owner.
If J. Smith owns an inspection company and is the face of the company, the primary inspector (or only inspector) and he sells to S. Johnson, the buyer will find most of the clients/agents and goodwill went out the door with J Smith. No one’s going to give a darn about S. Johnson if they call expecting J Smith to answer or at least be the inspector.
Making most one-man shops worthless.
And the other questions are so incredibly location-dependent.
Not offering radon means nothing in an area that doesn’t have radon, but would be a killer in an area known for high radon.
Not offering WDO in a state where a WDO license is hard to get is not the same as not offering WDO in a place like Texas where a WDO license is easy to get.
Not offering septic when you are based in a large metropolitan area means nothing compared to not offering septic in largely rural areas.
Yet none of this is taken into account.
The value spit out is entirely baseless.
Yes, stuff like that is true. But the difference in the value of your company between offering:
“WDO where a WDO license is hard to get”
and
"WDO in a state “where a WDO license is easy to get”
…would be too small of a factor to try to determine and wouldn’t move the needle that much. It could be calculated, but doing so would be silly, overall. Adjusting the value of an entire company depending on whether the WDO license was acquired in a state where the the license application is easier or harder… is kind of like trying to measure your waistline in thousands of an inch.
At most the Valuator is doing is awarding more value to a company that offers a lot of ancillary inspection services compared to a company that only does home inspections.
Yes, it is taken into consideration. It also calculates gross revenue per employee but I haven’t yet incorporated it. It’s a little tricky because some inspection companies still pay their inspectors as subcontractors on a 1099. Those subs are costs to the company, but not payroll. Anyway, a company that has less gross revenue but higher revenue per employee… is likely more profitable in margin… than a company with higher gross revenue but lower revenue per employee…, and maybe even more profitable nominally.
In a related side note that I discovered in my research on this. Of the 10 companies in the world with the highest revenue per employee, two are Fannie Mae and Freddie Mac.
The results make no sense.
I just put in the stats for where I was at the end of my 3rd year, when I was a one-man shop.
It spit out a value of $111-121K
Which is laughable for a one-man shop that’s only been in business 3 years.
No one in their right mind would pay that.
If I had sold in year 3, the buyer wouldn’t have my relationships with agents, they wouldn’t (necessarily) have my training or experience. What would they get? A logo, a website, and some tools.
The proof is out there that most one-man shops never sell. They just close down and go away. I’ve bought some ladders and other extra tools from guys shutting down, but no one’s ever had anything of much value to sell me.
Plus the CMI question makes no sense. So what if I’m a CMI? The person buying the business (likely) wouldn’t be. A CMI status doesn’t transfer over.
The value of an inspection company, actually any company, isn’t solely based on how long it has been in business. Longevity is a factor but not the largest.
True. Which is why many acquisitions require the owner to stay on for a while. It’s the same reason Dominic from Home Inspector Pro is still working at Porch after he sold to them.