Practice // Questions and comments // How to value a Very Small Enterprise (VSE)

Valuation : Question 13
How should one value a Very Small Enterprise (VSE) with sales of around €1m that operates on the very specific construction services sector?

ALL THEMES
  • COST OF CAPITAL
  • FINANCIAL ANALYSIS
  • FINANCIAL ENGINEERING
  • FINANCIAL MANAGEMENT
  • FINANCIAL POLICY
  • VALUATION
I'd suggest that you use the sum-of-the-parts method for valuing a VSE. This sort of company will clearly not have a strategic value because it is so small. Accordingly, it would be best to look at its net revalued assets. Very high earnings would almost certainly be due to a single manager or a personal relationship with a customer or supplier, and are thus by definition very fragile.

For more information, see chapter 31 of the Vernimmen.