In this Hardman Talks, Larissa Adams interviews Richard Angus, Head of Business Development at Hardman & Co, on the critical concept of ‘ROOM risk’ (or the risk of ‘Running Out Of Money’) and its growing relevance in private company valuations.
ROOM risk evaluates a company’s ability to sustain itself financially before reaching profitability or securing new funding, especially in today’s volatile economic climate. Richard emphasises that ignoring the risks of financial exhaustion can result in the destruction of previously created value, urging companies and investors to assess financial sustainability proactively.
Richard notes that current economic challenges, such as post-COVID recovery and higher inflation, have heightened the relevance of ROOM risk, with many UK businesses failing due to liquidity pressures and limited access to funding. He stresses that investors are advised to factor in ROOM risk to ensure that they are assessing businesses based on fair value rather than over-optimistic growth projections.
Watch the interview now to find out more about private company valuations, and get in touch with Richard if you are interested in finding out more about our corporate valuation work.
