Advali Analysis Model

Advali Analysis was created based on the patented Watson Performance Model which provides business owners with both a notional value of their business and, more importantly, the key drivers/performance indicators that impact that value. This software was developed to improve the business valuation services and business analysis services that are typically offered in isolation in today's commercial market; with both services typically being quite costly for business owners to acquire.

The primary reason for the separation of these two services appears to be due to the fact that most of the valuation methods typically used to value a business, such as earnings multiples, cannot be directly linked to key business performance indicators, such as return on assets. The reason it is difficult to link existing valuation methods to business analysis methods is due to the fact that most valuation methods rely on a single source of information, typically a business’s Income Statement. For example, valuations using multiples typically focus on profit, earnings before interest and taxes, or revenue. In contrast, business performance analysis focusses on ratios, such as return on assets, that utilise information from both the Income Statement and Balance Sheet.

However, unlike the traditional valuation methods, a relatively new valuation method known as the Abnormal Earnings Model uses information provided in both the Income Statement and Balance Sheet. The Watson Performance Model is designed to link financial performance to the value of a business. This intellectual property was achieved through combining two well-known academic theories/methodologies; the Abnormal Earnings Valuation methodology and the DuPoint Analysis methodology. The first relates to business valuation and the second to financial performance. The Watson Performance Model provides a link that enables these two theories to be connected, so as to create one overall model that relates business performance indicators to business value. Refer to the diagram below.