Since I started building traction in my learning curve on business valuation, I was told and read that Business valuation is the turning point of various skills, it is the combination of rigorous technical, financial assessment of a set of data but also an Art.
Then, yesterday I came across this excellent article about business valuation https://www.forbes.com/sites/darrendahl/2016/10/30/why-valuing-your-business-is-more-art-than-science/#30d99e0555a3
One statement blew my mind
“A good valuation is 75% art and 25% science because it takes into account the story behind the numbers of a business. Appraisals fall down when there isn’t enough support for the story behind it. It’s based not on just what happened, but on why things happened.”
Then I was questioning myself on what would be expected from me as a business valuator? What are the meaning and importance of artistic skills when valuing a company? Can we compare a business valuator with a singer, a painter, a writer and those brilliant/creative minds who are inspired to do great stuffs (paints, songs, craft etc..) that sometimes are valued and sold for millions of dollars or exposed into prestigious museum?
The simple answer is that I am not sure. But let break things down into smaller pieces, maybe we will get a better understanding of “the mystery of faith….” That created the link between business valuation and Art.
During my studies in the CBV program, I am taught that a professional and technically acceptable business valuation should go beyond a set of numbers in order to integrate specific factors of the subject company, industry, employees (key employees), fiscal impact (whether we are valuing asset or shares) and even environmental factors with a present and future perspective
When we take into consideration the fact that every company is unique in all aspects (culture, leadership, strategy, people, Management, etc.….) by the time you begin to extrapolate that uniqueness on a larger scale to integrate, the market, the legal environment, the industry and geographical aspects, you realize that a Business valuator needs a special set of skills in order to be able to provide the same standard of service across that diversity: it is called POLYVALENCE
One of the easier ways to define polyvalence is probably by listing the synonyms: versatile, adaptable, multipurpose, multi-skilled, agile, creative, thinking-out of the box, explore many avenues.
Therefore, to be polyvalent is to have a lot of different skills…this is a kind of simplistic and lazy definition…. Well I admit it 😊
Technically speaking, the concept of polyvalence can be explored on two main perspectives: vertical and horizontal
Horizontal polyvalence is the ability to integrate complementary skills into a single profession while the verticality of polyvalence is the ability to move from one set of skills into a profession to another set of skills in many other professions across a hierarchy or a value chain
The most pejorative way to look at polyvalence is to be an expert in everything and nothing! During my +15 years career I have known some colleagues who may have received the Nobel Price for that achievement. Unfortunately, it is not what I want to talk about today.
As a passionate business valuator and student in the CBV program my conviction is that I am building a horizontal polyvalence because valuing a company is not only about crunching the numbers, it is more about assessing the value from the organic factors of the company (operations, sales, Human resources, management, leadership style, succession plan) but also assessing the impact that external factors controllable/non-controllable can have on the value of that company
Business valuators are not experts in everything, however they are expert in valuing companies and many other things, in order to do that they need to know more than just few things.
In order to determine and formulate an accurate value a professional business valuator must have a set of skills that make it possible to navigate across the functionalities of the subject company but also to understand and interpret the internal and external factors
The formulation of hypothesis, adjustment of valuation parameters through discount or premium are some of the business valuation bold skill that are build on polyvalence
However, business valuator has a specific and unique way of formulating and disclosing the value determined. Since the valuation of a company can derive a range of reliable outcomes, the valuator needs to exhibit another set of skills that are beyond polyvalence in disclosing the outcome of the valuation in such a way that the result can stand disputes and courtroom litigations.
That being said, it is important to stress here that there is not a single way of acquiring polyvalence because it is built over time through practice and continuous learning
The CBV program is giving me the fundamental knowledge and background to become a polyvalent business valuation professional and I am also bringing with me a robust academic background and a set of transferable skills acquired during more than 15 years of experience across various industries into companies of various sizes in my skills set.
Please let me know how you build and value your polyvalence
