The Discover Report
Understand the Numbers
The Discover Report outputs many colorful graphs, dynamic tables, and computes complex algorithms. Behind the numbers are years of research, thousands of data points, and intricate formulas. While you don't have to understand the math, it is important for you to trust where the information comes from as well as what is being presented. Read below for more information on the Discover Report output.
Enterprise Value is a measure of a business's worth, calculated based on what a theoretical buyer would pay for the business after conducting thorough due diligence. It's a reflection of the business's ability to generate future revenue and profit.
The calculation of Enterprise Value involves an algorithm that takes into account industry Normalized Trading Ranges (NTR), financial performance, and the CoreValue Rating. This algorithm was developed at MIT and with the National Association of Certified Valuators
and Analysts (NACVA).
The Potential Value is a multiple of EBITA. That multiple will change based on your client’s industry. You can actually determine what that multiple is by dividing the Potential Value by your client’s EBITA.
This is a traditional and simple formula that many buyers of businesses use to judge the profitability of the business.
BUT - most businesses do not sell for their Potential Value. As a buyer completes the due diligence process, they’ll undoubtedly run into areas within the business that could be better.
As the business owner goes through the 18 Drivers, each “less than 100%” answer brings the business’s Enterprise Value down along the Normalized Trading Range. The Value Gap represents the difference between how much the business is worth today (Enterprise Value) and how much it could be worth (Potential Value).
It is a quantification of the business’ risks and opportunities and how much is being left on the table due to operation and market position shortcomings. It is listed as a range here as the questions have not yet been drilled down.