Hidden Opportunities: Bigger than Initially Thought

interVal was built on the premise that advisors and business owners don’t have enough time to make sense of the data the business owner is producing.  Without that time to make sense of it, it was impossible to proactively mitigate risk and capitalize on the hidden opportunities within it.  Democratizing access to this analysis — inclusive of business valuation — was at the core of the change we were looking to make.  We knew that empowering both business owners and their advisors with this information and saving them time in digesting and identifying the opportunities within it would create value for all parties involved.  What we didn’t know?  How big these opportunities were on aggregate.

Over the course of the last couple of years, the interVal platform has produced nearly $18.73B in SMB valuations, but what’s most interesting are the trends within this information.  We worked closely with our wealth management and banking customers to identify which parameters they would be most interested in measuring to identify significant opportunities they would like to know about. It was always the same question we asked of them:

“If you had unfettered access to information and nothing but time to go through it, what is the threshold you would need to see in order to be notified about an opportunity”?

We started with:

1. Excess working capital sitting on the balance sheet over and above what’s necessary to continue to run the business (wealth management).
2. The debt-to-equity ratio being met that you would deem worthy of a loan discussion (banking/lending).

The goal at onset was simply to identify these meaningful opportunities that our customers had indicated would be truly impactful and allow them to add value to their business owner customers, save time, and sell more products/services. The longer term implication? We’re seeing a trend, and the numbers are continuing to hold.

Across $18.73B in SMB valuations:

1. The interVal platform has identified $2.97B in excess working capital sitting on balance sheets - over an above the need for a business’ size and industry.
2. The interVal platform has identified $11.28B in new loan/leverage opportunities - based on a 3 to 1 debt to equity ratio and serviceability calculations.

The Trends:

1. Historically, the average excess working capital surfaced in the interVal platform has reached as high as 32% of total enterprise value. Today, it stands at 27.15%.
2. The loan opportunities surfaced in the interVal platform have reached a high of 83% of total enterprise value, with a current average of 70.1%.

What is this telling us?

The obvious: there are billions (if not trillions) of dollars worth of opportunities that are being missed out on. The real question is why? InterVal believes that the answer is two-fold:

1. Analyzing (and re-analyzing) financial data is time consuming, especially when the format it’s created in (PDFs) can’t be easily manipulated without human intervention..
2. There have never been more SMBs in human history and there have never been fewer advisors tasked with guiding them.

The result is billions of dollars of missed opportunities that could be used to help business owners grow, and allow their advisors to be the ones to help them do it. Capacity creation through automating data ingestion, analysis of that data, and identification of the opportunities is the only answer. The human capacity that is left should be acting on the opportunities.

interVal can prove there are plenty of them.

Author: Trevor Greenway