independent CPA
cannabis valuations services
The dirt
Company valuations are an interesting topic in the cannabis industry. On the one hand, there is an enormous potential for growth - the cannabis sector is estimated to reach $100 billion in revenue before the close of the next decade. On the other hand, many cannabis businesses are run with rather poor internal controls, inefficient processes, inaccurate systems and very poor records - all normal growing pains of a rapidly expanding company. Investors are understandably interested in the future value of the company and are often willing to put up with net losses in the early stages of a company if they believe the value of the company will appreciate greatly in the long term. A valuation of a company is a highly complicated process to begin with and includes elements of operations, cash flow, finance, accounting, tax, future growth etc. The difficulty can only increase in an industry that is as new and dynamic as that of cannabis and this leaves the evaluator with a difficult balancing act between growth potential and concrete business data. It is our opinion that no matter what firm you ultimately settle on to do your valuations, they should have a deep understanding of the cannabis industry.
Specific valuation services we offer:
+ Valuations
Valuation engagements result in a conclusion of value of the business, whether it be a single value or a range. The governing body of CPAs has a strict guideline which CPAs must follow when performing a valuation - as a result, a valuation is a very strict and highly formal service. Applying the guideline to the cannabis industry can prove to be difficult as businesses in the cannabis industry often operate differently for a variety of reasons.
+ Calculations
Calculations engagements are slightly less formal and stringent then valuation engagements. In the case of a calculation, the CPA firm and the client agree among themselves on what methodologies will be used and the extent to which those methodologies will be tested. Although less formal, the end goal of a calculation is the same as a valuation - a value or range of values.
+ Why Choose Green Books
An accurate valuation of your company can be accomplished with a well structured and logically rigorous set of assumptions and guidelines. Often, we must use external, independent sources of data to draw comparisons to other cannabis companies in similar situations to yours. Finally, as any good accountant would do, its invaluable to have in-depth documentation of the methodology used and the assumptions that went into the calculation. Whether you are looking to make an acquisition, set up a retirement fund for your employees or want to make yourself available for sale, Greenbooks is prepared to help guide you through your journey of getting a sticker price.
Take a look:
In order to begin to establish a baseline for valuation, it often makes sense to establish a parallel between your organization and a company that is either public or recently sold. The below viz begins to establish a basis of valuation for XYZ Company based off of four key metrics - revenue, EBITDA, EBIT and Price to Earnings. Note the large deltas between the different metrics on a year over year basis - very common in an industry as new as ours.
